Mahoney, Jones, Zed and Sweetchuck go undercover in the state penitentiary to find the mastermind of the diamond thefts. Meanwhile, Lassard learns that his first arrest, Muggsy Maggoy, is being released by hunches that he maybe the missing link to the crime. Lassard tails him to prove his old man status is still worthy of being a cop, before the trail leaves him permanently retired.