Spade says that if they're going to use Wilmer as the fall guy, he needs to get all the details straight to tell the police. So Gutman proceeds to tell Spade the story.
Flashback: After Thursby and Brigid had run off with the falcon, Gutman and Cairo decided that Thursby would have to be killed in order for Brigid to realize that she needed to patch things up with them. Wilmer shot Thursby, and Cairo (after he was done being questioned at police headquarters) found out that La Paloma had docked.
Cairo remembered hearing in Hong Kong that Captain Jacobi and Brigid had been seen together, so he assumed that Brigid had given the bird to Jacobi to transport to San Francisco.
When they all convened yesterday evening onboard the Paloma, Gutman believed they had finally come to an agreement and that Brigid would turn over the bird, but at the last minute, she, Jacobi and the falcon slipped away.
In an attempt to find the falcon, Wilmer had unintentionally set fire to the boat. They spent the rest of the day trying to find Brigid and Jacobi, finally tracking them down at the Coronet. When Jacobi left, Wilmer pursued him down an alleyway and shot him, but Jacobi managed to escape with the falcon.
Gutman and Wilmer then attempted to persuade Brigid to stop Jacobi, but pretty soon it was too late and the falcon came into Spade's possession.
Back to present time: Spade accepts Gutman's story as mostly accurate, and says that he'd be able to get the bird in a few hours. Gutman asks Brigid to bring in some coffee, but suggests that she leave the $10,000 with Spade. When Spade looks inside the envelope, there are only nine bills, instead of ten.
Gutman implies that Brigid stole one of the bills, so Spade forces her into the bathroom and orders her to remove all her clothes.
Brigid protests, insisting that she didn't take the money, but Spade orders her to undress. He doesn't find the money, and then realizes that Gutman had played a trick on him. Although Gutman laughs off his joke, he warns Spade not to trust Brigid.
At 7 o'clock, Spade phones Effie and asks her to pick up the figurine. She brings the brown parcel to Spade's apartment and then leaves.
Excitedly, Gutman opens the package to reveal the falcon. To confirm its authenticity, Gutman turns the bird over and scrapes off a small piece of black enamel from the base. Underneath is a layer of blackened metal. Gutman scrapes the metal to reveal more lead. The bird is a fake.
Gutman turns on Brigid, but she insists that this is the same bird she stole from Kemidov. Cairo then realizes that Kemidov must have discovered the true value of the bird when Gutman tried to buy it from him. The bird had been too easy to steal, which means Kemidov must have had a duplicate made.
Gutman is momentarily disappointed, but quickly regains his composure and decides to return to Constantinople to continue his search for the bird. Suddenly, everyone realizes that Wilmer has escaped.
Gutman asks Spade to return the $10,000. Spade keeps $1,000 for expenses and gives the rest back to Gutman, who then leaves with Cairo.