The flashbacks in this episode are not on the island! Instead, we get to see the origin of the Undertaking. The rich people of Starling City have gotten together to do something about the Glades, the source of all murder and crime in the city. Malcolm's plan is to destroy the Glades with an earthquake machine, which is extremely silly. The fun part about the flashbacks is that we get a lot of pre-island Oliver. He's so fresh and baby-faced! The reason he ran away on the Queen's Gambit with Sarah Lance is because Laurel asked him to move in with her.
In the modern-day plot, Oliver steals a laptop from an evil accountant, and that gives Felicity a lead on the person who might have paid to have Walter Steele kidnapped. An underground casino has to be infiltrated, which gives Felicity a chance to show off her card-counting skills. Everything goes fine until it doesn't, and then Oliver has to smash in and start threatening people. They learn that Walter is definitely dead.
Except that he isn't! When Oliver tells Moira and Thea that Walter is dead (according to a vaguely-defined source), Moira runs off to yell at Malcolm. And when Malcolm shows her his live feed of Walter's cell, Oliver is listening in. So now he knows that both Moira and Malcolm are bad guys! And he has an excuse to parachute into Bludhaven and kill a bunch of security guards en route to freeing Walter. And Oliver goes to apologize to Diggle for not trusting him, which solves their one-episode rift as well. Tommy and Laurel do not reconcile, because everyone has decided that Oliver's still in love with her. That might be true, but he doesn't have even the tiniest amount of chemistry with her, so it's not like I'm rooting for them to get back together.
The important thing here is that the Undertaking involves a secret earthquake machine. In case you were worried that it wouldn't be silly enough.
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In the opening narration, when Oliver says, "To do this, I must become something else," doesn't he mean that he's already become that thing? He's been a gritty-voiced, steely-eyed vigilante since the show started. Or maybe he's admitting that just arrowing people isn't going to get the job done, so he needs to become something more, which is what I'm hoping happens. This show has a lot of good elements, but I need a little more from the hero. Like heroism.
Someone weaselly is going to fly to Cayman Fidelity to make a special deposit for a special client. I love how the villains on this show always talk in ambiguous terms even when they're surrounded by their cronies. He sends his two guards to check the elevator. Oliver drops down behind them and pummels them into unconsciousness. Good guarding, guys. Oliver turns to the weasel: "Harold Bachman! You have failed this city!" Harold is an accountant, and Oliver spits a little when he rails about the destruction of innocent lives. Then he pops him in the face and steals his laptop.
Arrowlair. Felicity thinks they should give the laptop to the IRS, but Oliver wants her to give the money back to the victims first. Every rich person in Starling City got rich by stealing money directly from individual victims. Well, except the Queens and the Merlyns, I guess. Felicity says there's a problem: "Bachman's files are all protected with an asymmetric encryption algorithm." That might or might not mean anything. He didn't have the sense to have a password, so I'm guessing the rest of the security isn't going to be too complicated. This will take Felicity take a few days, so Oliver feels the need to be a jerk about how she'd better get started right away. She asks when he's going to make up with Diggle. Oliver claims he did everything he could to keep him, which is a lie. Felicity calls him on it. He didn't even apologize! Oliver did nothing at all to keep Diggle around.
Moira is on the phone demanding that insurance people keep looking for Walter. Remember Walter? The insurance people want to pay out his life insurance policy, and she won't let them. Thea soothes her. Even though I know Moira is a billionaire who lives in a castle, I'm impressed with how rich you have to be to be in the position of trying to convince an insurance company not to pay you.
Flashback! And not on the island! Instead, this is Moira welcoming Malcolm into her home. In the past! They chat about their kids (both of whom are still wastrels because this is five years ago) and go into a room where there's clearly an important meeting. Malcolm kids Robert Queen about the length of the driveway. Moira's friend Frank is also there. That's the Frank who helped Moira put a hit out on Malcolm, not Frank Bertinelli. Walter is at the door with some paperwork for Robert, and Moira has him wait in the study. So Walter is not part of the secret group.