"Psy vs. Psy" is the third episode of season two. Following the trail of a counterfeiter, the "Feds" show up in Santa Barbara with their own version of Lassiter and their very own "Shawn," spawning a rivalry and causing the cast to ban together for the first time to save the integrity of the department and prove who has the better psychic.
In 1985 Shawn and Henry are called into the vice priciples office. Henry claims that he did not allow his son to go on the feild trip. The vice priciples says that he did in fact sign the permission slip that allowed him to. He then says that that it is a forgery and Shawn tells them that they all look the same to him
Shawn and Gus get called in for an important meeting in Chief Vick's office but when they get there they are surprised to find Special Agent Lars Ewing of the Treasury Department, who is in town on a counterfeiting case and has brought along his partner, Lindsay Leikin, a psychic who not only has had great success on this case already but is determined to prove Shawn a fake.
On their way to Home Depot, the last known place the counterfeit money was passed, Vick tells Lassiter, Juliet, Shawn and Gus to assist the feds in any way - but make sure they don't get shown up in their own town. As Ewing and Leikin question the teller, Shawn and Gus tell them they are going to search the store for "auras." In fact, they find the security office where all the footage from the day the counterfeiter hit. The guard tells them a federal psychic already beat them to it but said the tapes couldn't give them a positive ID. Shawn asks to see the footage anyway, and although the culprit never faces the camera, he does notice a distinct key on his key ring. Back with the teller, Ewing is aggravated he can't give any kind of ID, but Lindsay jumps in and describes him perfectly, showing Shawn up. Shawn's frustrated. He knows there are no such things as psychics, but how is she doing it? Gus tells him maybe she's just better than him. Shawn says the key the counterfeiter had was from a Nissan. He told Lassiter to check the security cameras in the parking lot. All of the Nissan's checked out except a new one. This guy is too smart to still be holding onto that car. He'll need new wheels and he'll need to drop a lot of his fake cash. That means only one place.
They arrive at Saladin Motorworks, a high-end exotic car dealership only to find Lindsay, Ewing, Lassiter, Juliet and Vick already there. The cops fill Shawn and Gus in on what they already know. Their guy bought a Lamborghini in cash. Next day he returns it for half its value - trading $46,000 in worthless paper for $26,000 in legal tender. The only lead they have is that the Lamborghini was spotted outside of town in Goleta but it was moving too fast to get an ID. Shawn suggests to Lindsay that they join forces. She tells him she doesn't need him, and she's in a relationship. When they rejoin Ewing who is examining the counterfeit bills, Shawn notices something different about one of them, and takes a note of the serial number.
Back at the police station, Shawn and Gus are getting the cold shoulder due to their underwhelming performance so far, until they let everyone know not all the bills were counterfeit. Shawn says the culprit was running out of money and had to use one real bill, giving them the serial number to prove it. He needs to print more money and if they find a place where he can do that safely, they find him. At the Psych office, Lindsay comes by to admit that maybe they are better than she thought and she's willing to work together if they still are. Together, Shawn and Lindsay "psychically" determine that the counterfeiter's den needs to be someplace transient and remote, where someone can come and go anonymously paying cash. A place where a large printer could make a lot of noise without being heard. Gus says he knows of a hotel that fits that description is currently undergoing renovations and is used to dealing in cash.
The three of them meet Ewing, Vick, Lassiter and Juliet at the hotel. With their specifications added to a guest not wanting maid service, they find the right room but no counterfeiter. Lindsay says the guy printed $50,000 worth but Shawn, seeing empty wrappers in the closet, corrects her figure to $500,000. Lindsay claims that to be impossible. Lassiter finds evidence that the guy made a fake passport. He's running. They need to find him now.
As the cops and Ewing move to stake out exits out of town, Lindsay asks Shawn to continue their psychic work together back at her hotel room. After she tells him she broke up with her boyfriend, they end up spending the night together. The next morning, Shawn wakes up and Lindsay is gone. He searches her hotel room and only finds a receipt for coffee. He gets a call from Gus and they head to a crime scene. They've found their counterfeiter dead of a gunshot wound. Once again, everyone is already there. Lindsay reaches down and touches the body for vibes. Seems like that's the end of their counterfeiting case.
Shawn is bummed that, in the end, Lindsay was better than him. Gus, trying to cheer him up, points out that he surprised her with the $500,000 thing. That leads Shawn to put it all together and they run to catch Ewing and Lindsay at the airport. It turns out Lindsay was in on the scam. She always seemed ahead of the case because she knew the counterfeiter, what he was doing and where he was going to be. He was her boyfriend. She met him for coffee in Goleta (the receipt Shawn found in her hotel) on the same day the Lamborghini was spotted there. In his hotel room, she realized he was about to go on the lam without her. She killed him, then touched the body to cover the evidence. After they find the money in her suitcase, Shawn declares that the worst part of it all is that people like her give real psychics like him a bad name.
The gallery for Psy vs. Psy can be found here.
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