The scene opens up with Patrick, dressed in a business suit, asking where he can get something to eat. Squidward walks in, and tells him the answer is before him: the Krusty Krab. Mr. Krabs, dressed in a leotard, jumps out of the Krusty Krab, and SpongeBob slides down a rainbow to his side, and Squidward, who rides a dolphin while holding a plate with Krabby Patties, which Patrick eats. Suddenly, SpongeBob voice is heard describing Patrick's actions, then the scene turns to him and Mr. Krabs in front of a storyboard planned for a commercial. Mr. Krabs asks why he's in a leotard, and he says it's because he's the mascot. Mr. Krabs does not like this, and tears up the storyboard, telling him he needs a "masterpiece". Sad and sighing, he walks to Squidward's counter, sighing. When Squidward ignores him, he sighs again and again, each sigh more drawn-out than the one before, until Squidward gets so annoyed he asks what's troubling me. He tells him about his problems, but Squidward doesn't care. As he walks into the dining area, Squidward notices a patron squirting ketchup onto a pile of Krabby Patties.
The patron slaps the Krabby Patties off the plate. He asks Squidward for mustard, which he squirts onto a plate. When the patron leaves, Squidward looks at the plate and recognizes it as the artstyle of Fiasco. Mr. Krabs is about to throw it away when Squidward tells him it's actually a masterpiece. People run over to him, offering to buy it, but Mr. Krabs, seeing an opportunity to make money, tries to take the artwork from Squidward, and they argue over who really owns it. Just then, Farfel Bainbridge, an art evaluator, comes in and declares the work to be a national treasure, thus meaning neither Mr. Krabs nor Squidward own it. Mr. Krabs will allow people to view it in his restaurant for free, provided they buy Krabby Patties (two each).
Later, Plankton sees the artwork, and mistakes it for garbage. Planning to reverse-engineer the recipe, he steals it. He is immediately chased by police officers who dog him every step of the way, from a movie theater, a grocery store, and a satellite in space. When he loses them, he is baffled as to why police are chasing him, rather than Mr. Krabs. At night, he knocks on Patrick's rock, but when Patrick answers, he angrily tells him that he's got a busy day of doing nothing tomorrow. Plankton goes to Spongebob's house, using a spoon to hold SpongeBob and Gary hostage, and demands an explanation as to why the police are after him. SpongeBob explained that what he has stolen is in fact a work of art. Plankton gets the idea to sell the artwork, and declared Spongebob and Gary to be accomplices to his crime. Patrick comes in, and yells at everyone for making so much noise as to keep him awake, while eating something.
SpongeBob asks what it is that Patrick ate, and Patrick reveals it was the artwork, which he mistook for hors d'oeuvres. Plankton declares him an accomplice as well. Suddenly, Squidward bursts in with the police, having called them because of all the noise. When they see Plankton, they immediately arrest him, along with Squidward and everyone else until they could figure this whole situation out. At the police station, Plankton is locked away. Gary, Patrick, and SpongeBob are free since Mr. Krabs explains they were not involved with the theft. But since the artwork is now in Patrick's stomach, Mr. Krabs has him stand behind an X-Ray machine which shows the artwork inside him. Fiasco is moved by Patrick's style, stating he will never make art again. The scene pans to Squidward, behind bars, asking about his phone call.
In this episode, Squidward was blamed in the most unfair, ridiculous way possible. He never did anything as a crime. In fact, he actually helped the police by turning in Plankton.
However, the police may have turn in Squidward for being a tattletale. Back in the episode Driven to Tears, when SpongeBob tried to tell on Patrick to the cops saying he was going over the speed limit, the policeman actually threatened to run SpongeBob in with him then saying "tattletale." It's also possible that he was arrested for the fact that Fiasco said he will never paint again, and the plate painting made of Krabby Patties was worthless.
It's also possible that Squidward got arrested for calling the police on Spongebob and Patrick for nothing when it was Plankton they were after.
This is another instance where Patrick does something stupid which causes people to think he has artistic talent. A previous instance was The Googly Artiste, in which he simply glued googly eyes onto rocks and other objects, which were considered great art.