When Lady Lou walked down a row of Sing Sing jail cells on her way to visit ex-boyfriend Chick, all the prisoners along the corridor knew her, as she joked about how she was familiar with all of them: "Hey, what is this? Old Home Week?" Chick rightly suspected that Lady Lou had been untrue and unfaithful to him during his incarceration. He complained and threatened that if Lou had double-crossed and two-timed him before he was released from jail, he would kill her:

You've been double-crossing me, you're gonna pay for it. Every day every minute of this stretch, you're gonna pay for it.

She warmed up to him and promised: "If I can wait a year, you can wait a year...Why, that ain't nothin' when you got will power like me...Don't worry. I'll be true to ya." He let it be known that he didn't expect to remain in prison for very long.

When the city mission next door to the bar was about to close for not paying rent, Lou bought the Mission building's mortgage/rent for $12,000, offering her large diamond bracelet as payment. But she wanted the papers to be drawn up to "make it appear like the mission bought the building themselves." Her real reason for purchasing the next-door mission was to lure Captain Cummings closer to her place.

Later, Lady Lou performed "I Wonder Where My Easy Rider's Gone" on stage, about a jockey rider that she bet on. Meanwhile, a power struggle and a love triangle had developed between Gus and his rival competitor Dan Flynn. Flynn had intentions to become head of the saloon after Gus was displaced so that he could also possess Lady Lou:

Lou: Are ya thinkin' about movin' in?
Dan: Yeah, I thought I might.
Lou: When?
Dan: Oh, when Gus moves out.
Lou: Flynn, you're an optimist...

Lou's normally semi-tranquil life would soon change with three major incidents or discoveries:

• privately, she was tipped off by Flynn that Gus was "in the hole." It was rumored that Gus' illegal operations (including counterfeiting) had been found out by a slick undercover agent ("dick") nicknamed "The Hawk" ("the slickest bird in the business"): "He's been tipped off to Gus and he's got the goods on him." And as a kept woman, Lady Lou was threatened by Flynn with being implicated in Gus's crimes:

Dan: If Gus goes up the river, you'll go along with him. I'm tippin' ya off private.
Lou: What are ya tryin' to do, scare me, Dan? Well, when I need protection, I'll write ya a letter.

• Lou was also informed by bodyguard Spider Kane (Dewey Robinson) that Chick, who missed her and his freedom, had escaped from jail, and was in the area
  
  
• Captain Cummings also called on Lady Lou in her upstairs quarters to ask about the fate and whereabouts of Sally - who had been sold by Rita - her "benefactress." He asked Lou how much she knew about Sally Glynn's current situation. Lou first reacted with jealousy: "So ya come to me to find another woman!" Sally's father had been at the mission next door when the young girl came to the bar, and was now looking for her. When told that Gus "and his friends" had found a 'job' for Sally, the Captain was relieved that Lou claimed that she knew nothing about their crimes:

"Well, I'm glad to hear that...I'm anxious not to see you mixed up in it." He wondered: "I guess I'm takin' your time." She replied: "What do you suppose my time's for?"

Lou invited him to sit down and teased him to relax as she showed off her diamonds:

Lou: Sit down. (He complied.) That's it. Loosen up. Unbend. You'll feel better....
Captain: (admiring her jewelry) So all this is your famous collection, eh?
Lou: Ah, this is just my summer jewelry. You oughta see my winter stuff...You know it was a toss-up whether I go in for diamonds or sing in the choir. The choir lost.
Captain: Well, they're wonderful. They always seem so cold to me, they have no warmth, no soul. I'm sorry you think more of your diamonds than you do of your soul.
Lou: I'm sorry you think more of my soul than you do of my diamonds. Maybe I ain't got no soul.
Captain: Ah, yes, you have, but you keep it hidden under a mask. You'll wake up and find it sometime. Haven't you ever met a man that could make you happy?
Lou: Sure, lots of times.

As he was leaving, she stopped him at the door, and when he tried to kiss her, she deflected his attempt but offered another invitation: "Come up again, anytime." Once the Captain was out of her room and had exited her door, Lou delivered a self-satisfied line to herself: "Well, it won't be long now."

Without real cash, Gus Jordan had given some of his counterfeit money to his two cohorts Rita and Serge to spend, as Serge commented: "The only way to get rich is to make one's own money."

Meanwhile, police arrived at the club to search for escaped con Chick, who had stealthily entered Lou's bedroom window and demanded that the enticing Lou (in a low-cut gown and dripping in jewels) pack up and run away with him after his difficult getaway ("me jumpin' freights and crawlin' through the mud to get to you"). But she refused and ordered him out. When he threatened to choke and strangle her - although he was unable to carry through with it. She eventually promised to meet him later in the evening after her performance in the show. He planned to hide in her room before picking her up and making a getaway with her.

Meanwhile downstairs in the saloon, Rita was pointed out and accused by Sally of some crime (her involvement in a white slavery ring): "That's her!...She's the one that done it." Upstairs, Rita's boyfriend Serge was finally following through on Lou's long-standing invitation to visit. He arrived at Lou's apartment door and inside, he presented her with a gift of a diamond pin (it belonged to Rita) - he knew that Lou's true love was jewelry rather than men. Lou admired the diamonds given to her by Serge: ("Diamonds is my career") just as Rita walked in on him pinning her diamond on Lou's bodice above her heaving breast, and planting a brief kiss on Lou's lips. Their kiss was aborted by the upset and furious Rita with a sharp knife, who demanded the diamond stick pin and in the struggle, Lou accidentally stabbed Rita to death in the abdomen.

When Gus and a policeman arrived at the apartment to search for Chick, Lou hid the fact that Rita was dead by placing her slumped over in a chair while she combed her hair. After they left, Lou had her bodyguard Spider dispose of Rita's body, while she would take to the stage to sing "A Guy What Takes His Time."

After her performance, Lou spoke to the "funny-acting" Gus about his worries over his own fate, due to Sally and her potential testimony against him: "I'm sorry I ever bothered with that girl." Gus was also jealous of Serge and her other male admirers, including the mission Captain:

Gus: So you met a man who wouldn't fall for you, hey?
Lou: Who wants him to fall? Why, he'd be the kind a woman would have to marry to get rid of.

Jordan was fearful that Flynn was poised to take over his business, and that the Hawk (according to Lou) was "spottin' the place day and night," after Lou divulged that she had heard about evidence that was mounting against her boss/bar owner:

Gus, I hope you ain't been sendin' them girls to the Coast to become classy dips and burglars, like Flynn thinks.

As Lou returned to the stage to sing "Frankie and Johnny," she signaled to Flynn to later meet her (knowing that Chick would also be waiting for her and that the two would have a deadly encounter). At the end of her performance, shots rang out as Chick killed Flynn as he was entering Lou's apartment. The gunfire drew a police raid upon the establishment. Cummings revealed himself to Gus as the undercover federal agent "The Hawk" with a badge. Gus was arrested for "making and passing counterfeit money" and sent to jail to end his criminal operations and activities. Lou snarled at the Hawk:

You! The Hawk! A nightbird workin' in the dark, stealin' the confidence of people, the lowest kind of a thief.

Serge was also apprehended after being identified by Sally. Meanwhile, in Lou's apartment, she was again threatened by Chick, who thought that Lou had double-crossed and betrayed him. He was shot in the arm (while wielding a gun at Lou) and arrested by the Hawk and his men during the confrontation. Not to leave her behind, the Hawk pulled out handcuffs for Lou to also arrest her and take her to jail for her association with the criminals (to acquire her many diamonds):

Lou: Those absolutely necessary? You know I wasn't born with them.
The Hawk: No. A lot of men would have been safer if you had.
Lou: Oh, I don't know. Hands ain't everything. (He put the handcuffs away)
The Hawk: All right. Come on.
Lou (ordering angrily): My wrap. (He retrieved her white fur wrap and placed it on her shoulders.) If you want to help me, pick up my train.

In the final scene, the Hawk took Lou away to 'prison' in an open, horse-drawn carriage rather than in the police wagon with Serge and Chick. But she complained to the Hawk: "I think I'd have liked the wagon better." When he demanded to hold her hand, she retorted: "It ain't heavy. I can hold it myself."

He noticed all the glittering diamonds on her hand, and called her his "prisoner" - but instead of handcuffing her, he had another alternative:

The Hawk: You know, you remind me of a glittering palace of ice.
Lou: I ain't ice.
The Hawk: I didn't say you were, but your diamonds are all going to the storehouse.
Lou: You said I had a soul - I looked for it but I didn't find it.
The Hawk: You will.
Lou: Where? In jail?
The Hawk: No, that's not the place for you.
Lou: Oh, ya got me, ain't ya?
The Hawk: Yeah, I gotcha, you're my prisoner, and I'm gonna be your jailer for a long, long time.
Lou: Oh, yeah?
The Hawk: Yeah, and you can start doing that stretch right now.

He removed all her other rings and put his own diamond ring on her finger, and then threatened 'jailing her' with a marital proposal. She noticed the new rock on her marriage finger:

Lady Lou: Where'd you get that? Dark, and handsome.
Capt. Cummings: (scolding) You-Bad-Girl.
Lady Lou: (cooing) Mmm, you'll find out.

They embraced and kissed in the final fadeout to black.