This chapter is pretty short, but a whole lot happens in it. Pictures of Holly are in every major newspaper in the city that night because, shortly after getting back from the horseback ride, she's arrested for being part of a drug ring operated by Sally.
The newspapers describe Holly as a "beautiful movie starlet and café society celebrity" (14.2), and they report her as a "key figure" (14.2) in Sally's drug operations. We also learn through the papers that the "lawyer" O'Shaughnessy is actually a "defrocked priest" (14.2) who's been in trouble with the law for years. He also gets arrested that night.
So, it turns out the weather reports that Holly thought were just a way for O'Shaughnessy to make sure she had been to see Sally were actually "verbally coded messages" (14.2) that allowed Sally to "keep first-hand control of a world-wide narcotics syndicate with outposts in Mexico, Cuba, Sicily, Tangier, Tehran and Dakar" (14.2).
The newspapers are able to get a comment from Holly, and she freely admits to her weekly visits to Sing Sing. She defends Sally as a man who "believes in God" (14.2). She also admits to smoking marijuana from time to time, and the newspapers report this as Holly's admission of a drug addiction (which she very clearly did not actually admit).
The newspapers also report that Holly got arrested in her apartment, but we learn from the narrator that she was actually arrested in his place, in his bathroom. Here's how it happens: After the horse-riding fiasco, the narrator is soaking in a bath while Holly keeps him company and waits to "rub him with Sloan's liniment and tuck [him] into bed" (14.3). They hear a knock at the door, and in bursts Madame Spanella (she's one of their neighbors who has never liked Holly and who tries to get her kicked out of the building at some point). Two detectives, "one of them a lady with thick yellow braids roped around her head" (14.3), follow her into the bathroom.
Madame Spanella has always thought of Holly as a little too "easy," and when she sees Holly in the bathroom with the naked narrator (Holly is also naked for some reason that we're not sure of), she calls her a "'whore'" (14.4) and points her out to the detectives as "the wanted woman" (14.3).
The male detective doesn't seem to know what to do with Holly, but the female detective displays a "harsh enjoyment" (14.4) as she physically tries to get Holly to come with them. Holly refuses and calls the woman a "dreary, driveling, old bull-dyke" (14.4). The female detective slaps Holly in the face, which makes her drop the glass bottle of liniment. This happens just as the narrator is trying to get out of the tub, and he steps on the broken glass, cuts his feet, and leaves blood all over the floor.
As Holly is being taken away, she says one final thing to the narrator: "Don't forget, […] please feed the cat" (14.4) (so she does care about the nameless feline after all).