One day, Scrooge is treating himself, Huey, Dewey and Louie to ice cream. Because of a "buy three, get one free" deal the ice cream parlour had going on, Scrooge remarks that a deal like that should be against the law. Much to Scrooge's chagrin, a police officer shows up and has him arrested. When Louie tries to win the officer over by confessing about an overdue library book, the officer tells them that Scrooge is really being arrested for grand theft.
At McDuck Manor, the police find the painting that Scrooge apparently stole; Pablo Piquacko's Duck Á L'Orange. Mrs. Beakley can't imagine what Scrooge would be doing with a painting like that, yet neither she nor the boys can figure out what it was doing in the basement.
At Scrooge's trial, Flintheart Glomgold announces that Scrooge stole the Duck Á L'Orange painting from his art gallery, and he has proof of it on a video tape. While he is under oath, Launchpad confesses that he crashed his plane near Glomgold's gallery on the night of the robbery while Scrooge went to pick up a top-secret painting. Mrs. Beakley then confesses that Scrooge snuck into his home through a back window with a painting on the night of the robbery. Scrooge tries to explain that he hired an artist to paint a family portrait, and that he wanted the whole thing to be a surprise, but it doesn't matter to the judge, as the portrait is nowhere to be found. When Glomgold's lawyer plays the security tape, everyone witnesses Scrooge stealing the painting, he is found guilty, and sentenced to be jailed at Aquatraz for fifteen years.
Once Scrooge is sent off to jail, the boys are determined to prove Scrooge innocent, so they snoop around the art gallery that night. After spying through the back window, they see Glomgold writing a check to Pierre La Oink, the painter who actually painted Scrooge's family portrait. Glomgold pays La Oink, and tells him to dispose of the painting, which is the only evidence that can prove Scrooge innocent. Huey decides to head La Oink off at the Duckburg Bay Bridge, which is where he intends to dump the painting.
Scrooge eventually arrives at the island prison of Aquatraz, and meets his cellmate, Mad Dog McGurk, a large, aggressive, tough guy who hates rich ducks, because they're rich, and he's not. Mad Dog bullies Scrooge around in their cell that night and Scrooge isn't certain that he'll survive his sentence.
Meanwhile, La Oink proceeds to dump the painting from the bridge, which the boys recover with some scuba gear. Unfortunately, the water smudged up the paint, ruining the portrait. On top of that, the ruined painting isn't enough to change the judge's mind. The judge does let the boys borrow the security tape though, which Dewey wants to study.
Back at Aquatraz, Mad Dog and the other prisoners are giving Scrooge a hard time, by attaching Scrooge to a ball and chain, and using the ball for bowling. They then force Scrooge into arm wrestling all of them, but despite their large statures, Scrooge wins every time, as he's had plenty of experience lifting heavy money bags. Mad Dog and another prisoner then eat Scrooge's dinner, so Scrooge gets pissed and gets in a fight with them. When a guard asks what's going on, Scrooge tells him that they were just teaching him some dance, instead of ratting on them. This experience causes Mad Dog to stop being so cruel to Scrooge.
On visiting day, Mrs. Beakley, the boys and Webby come to visit Scrooge in his cell. Mad Dog feels jealous because he doesn't have any visitors. Mrs. Beakley then fixes up the place and offers Mad Dog a homemade fudge bar, bringing out the nice guy inside. Before they leave, the boys vow to clear Scrooge's name. With the visitors gone, Mad Dog tells Scrooge about his mother, and how she's too poor to even come and visit any more. But Scrooge has an idea. On the next visiting day, Scrooge reveals a surprise for Mad Dog; his mother. For this, Mad Dog is extremely grateful. That night, Mad Dog tells Scrooge that the next night they'll be breaking out, whether Scrooge likes it or not.
On the next night, Mad Dog has taken Scrooge hostage, and is climbing down from their cell window with bed sheets. Guards spot them as they fall in the mud at the base of the prison, and try to shoot them, but they miss. Mad Dog leads Scrooge through a drain pipe, telling him one of his friends has a boat waiting at the other end, and proposes that they can live the rest of their lives as fugitives.
The nephews are still trying to find evidence on the video tape, when Huey picks up an important clue. After "Scrooge" stole the painting, his reflection in a mirror shows that Glomgold actually dressed up as Scrooge, so that he could steal the painting and frame him. Just before they can tell Mrs. Beakley, an announcer on the radio announces that Scrooge has escaped from prison.
When Scrooge and Mad Dog come out of the pipe, they realize that there is no boat, so Mad Dog insists that they swim for it. After jumping in the water, Mad Dog hits his head on a rock and looses consciousness, so Scrooge has to drag him to shore. When Mad Dog comes to, Scrooge tells him that they have to turn themselves in. Mad Dog explains that he shouldn't have ever been in jail in the first place, because he was framed. More specifically, a rich duck ordered him to pick up some jewels from a jewellery store that didn't belong to the duck. When Mad Dog describes the duck to Scrooge, Scrooge realizes that it was Glomgold. By this point, the warden shows up in a helicopter, and announces to a frightened Scrooge that he's innocent.
Later on, Scrooge and Mad Dog have been cleared of all charges and granted pardons. Also, because Glomgold stole his own painting, he has been given an unorthodox punishment for doing so. Glomgold must keep a portrait of the richest duck in the world over his fireplace for the next fifteen years, which pisses off Glomgold greatly. Mad Dog then hugs Scrooge for helping him out, and offers to be his bodyguard. Scrooge declares that he could use a bodyguard to protect him from Mad Dog hugging him.