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In "The Nasty Nephew," Zelda (Mary Wickes) brings over her nephew, Leroy (Stephen Ciccarelli) to play with the boys for the weekend. Unfortunately, Leroy is a sour-puss, and not easily impressed. He hates surfing and doesn't want to play.
When Zelda suggests that Johnny (Johnny Whitaker) and Scott (Scott Kolden) show Leroy the Club House, they realize they will have to hide Sigmund from the interloper. They offer to induct Leroy into "The Octopus Club," but even that doesn't impress the boy.
While hiding from Leroy, Sigmund is captured by his family, and the boys must rescue him. Leroy gets trapped in the cave, and also requires rescuing by Scott and Johnny. In the end, however, Leroy meets Sigmund, and agrees to keep his secret.
In "The Nasty Nephew," a familiar plot is regurgitated, with Sigmund once more captured, and requiring a rescue from his human buddies. This is the plot every week, with an interlude to the cave, and a visit to the sea monster family.
This episode ends with a song, "Keeping a Secret," which sees Johnny dating a new girlfriend (not Pamelyn Ferdin's Peggy, alas.) This ending montage has nothing to do with the rest of the episode, save for Leroy's agreement to keep Sigmund's secret.
The sea monster-sub-plot this week sees Big Daddy visited by an auditor from the government (a new sea monster suit!) who accuses him of tax evasion. Apparently, Big Daddy claimed Sigmund as one of his deductions, and now that Sigmund has left the cave, there is no proof Big Daddy cares for him. "You let my tax deduction get away!" Big Daddy yells at his other sons.
Next week: "Monster Rock Festival."