The mayor hosts a scary movie night and shows a Vincent van Ghoul movie where Vincent get turned into a Fog Ghoul. The movie gets interrupted by a Ghoul who rips through the screen and scares everyone off. In the morning the gang looks around for clues but doesn't find anything significant. Velma gets spooked by the caretaker Evallo who looks much like the ghoul and even acts similar.
Instead of questioning Evallo, the rest of the gand decides to investigate a mysterious house near the cemetery. The house has a super-nice family by the name of Bjorkland living in it. The mother, Model Bjorkland, tells them how she moved there because she was trying to raise money.
Later Velma is walking around looking for clues when Mr. E approaches her and asks her to help him again. She declines and walks away. After she leaves Pericles tries to talk "Mr. E" aka Ricky into working with him again, saying that Cassidy is bitter, and that Brad and Judy are enigmas.
While Velma is out, the gang gets attacked by the Ghoul in the Bjorkland house.
Then there's a flashback to when Ricky and Pericles were best friends.
Velma finds out that Count Evallo von Meanskrieg was rejected for a work permit for being "pure evil". When she tries to tell the gang the laugh and say it can't be that obvious.
Velma goes off to look for clues again and gets ambushed by the Ghoul in the cemetery.
Velma talks to Sheriff Stone and gets him to help her trap the Ghoul. They find out that the Ghoul is using one of the crypts to hide a natural gas well. After a chase the catch the Ghoul and find out that Evallo wanted to steal the gas to prove that he was worthy of his family's evil name. The mayor then reveals that the Gas company next to the Cemetery owes the Bjorklands money for having tapped into the gas field under the cemetery. When Mrs. Bjorkland sees how much money it is she decides to move by to the country she emigrated to the US from and leaves. Then Sheriff Stone has to release Evallo for deportation as he has "diploamtic immunity".
Right before the credits roll we see that Ricky and Pericles had decided to put the past behind them and work together to get the treasure, but first they must get rid of Cassidy.