Homer and Marge wake on New Year's Day with hangovers after the family's New Year's Eve celebration. As Homer takes out the garbage, Chief Wiggum, Eddie, and Lou arrive and issue him multiple citations and fines - the result of recently passed, frivolous laws intended to bring in revenue for the city when broken. Taking Moe's suggestion that he bribe a city official to clear up the fines, Homer leaves a sack full of cash on the official's desk but is promptly arrested, convicted, and sentenced to 10 years in prison. Wiggum takes pity on Homer and tells him to meet with an FBI agent, who offers to reduce the sentence if Homer will go undercover in the prison to investigate Fat Tony, who is also serving time along with his top henchmen.
Homer quickly gains favor with Fat Tony, due to a confrontation engineered by the FBI agent, and Fat Tony breaks him and the entire group out of prison and offers him a chance to join the syndicate. Homer's first task is to burn down Moe's Tavern in revenge for Moe's rudeness toward Fat Tony on the phone, but Homer finds that Moe has already done the deed himself. Fat Tony accepts Homer into the syndicate and the two develop a special bond; however, complications over a scheme to import weapons put the syndicate under severe stress. Eventually Fat Tony discovers Homer's undercover status and, emotionally devastated by his betrayal, suffers a fatal heart attack.
Meanwhile, Marge has begun to panic over being unable to communicate with Homer, as she knows nothing of his undercover work and cannot get any information on his whereabouts. She is surprised and thrilled when he returns home with his prison sentence lifted, but Homer feels guilt for Fat Tony's death and bitterness toward the government over being used to bring him down. Homer visits Fat Tony's grave to apologize, but is kidnapped by his cousin Fit Tony, who plans to kill him for revenge. However, Fit Tony spares his life after Homer tells of the time he and Fat Tony spent together, seeing that Fat Tony lives on in Homer's memories. Fit Tony takes charge of the syndicate, but the stress of the position causes him to overeat and gain weight, becoming known first as Fit Fat Tony and then simply Fat Tony - now physically indistinguishable from the original.