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Mr. Bambridge and various other Middlemarch men are hanging out at the Green Dragon, gossiping.
Bambridge tells the listeners that he'd had a drink or five with a guy named Raffles who had said that he knew all of Bulstrode's secrets and bragged that he could put him in jail if he liked.
But Hopkins knows that a man named Raffles was just buried in Middlemarch, and that Bulstrode paid for the funeral.
They're all rather shocked about this.
Hopkins tells them that Lydgate was the only doctor who saw the man before he died, and that Bulstrode had sat up with him for two nights at Stone Court before he died.
The gossip spreads around Middlemarch like wildfire.
It's a good thing that most people don't know that Bulstrode gave Lydgate a huge loan the day before Raffles died, or he'd be suspected, too.
But then Mrs. Bulstrode mentions it to her friend Mrs. Plymdale, who mentions it to her friend Mrs. Toller…and then finally that piece of the gossip gets spread around, too.
No one can prove anything against either Bulstrode or Lydgate, of course, but the whole thing has "an ugly look," to quote most Middlemarchers.
All the townspeople are enjoying having a scandal to gossip about.
A meeting of the Board of Trustees of the hospital is called.
(Bulstrode is on the board, but he's not the chairman.)
Lydgate is there, too, as the chief medical man at the hospital.
The board asks Bulstrode to step down because of the scandal.
And Lydgate realizes that the town believes that he took a bribe from Bulstrode.
After the meeting, Farebrother runs into Mr. Brooke, who tells him that Dorothea would like to meet with him.
They tell Dorothea about the scandal with Bulstrode, and that Lydgate is implicated in it, too.
Part of the gossip about Bulstrode involves Will Ladislaw's family. The fact that he's descended from a Polish musician on one side, and a thieving pawnbroker on the other doesn't do anything for his reputation amongst her friends and family.
She immediately is determined to clear Lydgate's name – she refuses to believe that he knew anything about it.