It's the Holidays in Pawnee while Rob Lowe and Alan Yang watch the 12th episode of season two! In "Christmas Scandal" A meeting with a disgraced councilman lands Leslie in the middle of a scandal. On today's episode find out the origins of the character Alexa Softcastle, the mystery note in the writer's room that read "Blood Diamond Phillips", and this episode's unique connection to SNL.
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The parks department performs in the annual Pawnee City Government Follies that riffs local politics, including one sketch that skewers Councilman Bill Dexhart (Kevin Symons), who was recently discovered to be involved in many bizarre sex scandals. Leslie is later asked to meet Dexhart at a restaurant, where she learns the sketch was accidentally accurate about another bizarre sex scandal that has not been made public. After assuring Dexhart that it was merely a coincidence, Leslie discovers that the local tabloid, The Pawnee Sun, has taken pictures of their meeting and is reporting that Leslie is Dexhart's new mistress.
The speculation about Dexhart and Leslie quickly spins out of control. Ron decides to give Leslie the day off to lie low and distributes her daily duties among the rest of the staff. Everyone is amazed how much Leslie does by herself each day and the entire group struggles to complete their tasks. Leslie has lunch with Dave (Louis C.K.), who reveals that his unit in the US Army Reserve has been called up to active duty in San Diego for a year to eighteen months, and invites Leslie to make the move with him.
The local show "Pawnee Today" digs up an old video of Leslie shaking hands with Dexhart and overanalyzes every aspect of the short clip. Ann brings Dexhart to her home, where Ann and Leslie demand he clear Leslie's name. Dexhart refuses because the fake scandal is so docile compared to his real transgressions that it is actually positive press for him. Soon after, Ann is horrified to discover that a news crew secretly followed Dexhart to her home and took a photograph of the meeting, resulting in speculation that Ann is Leslie's lesbian lover in a three-way relationship with Dexhart. A furious Leslie schedules an appearance on "Pawnee Today" to clear her name once and for all. On the show, host Joan Callamezzo (Mo Collins) surprises Leslie by bringing out Dexhart, who tries to prove their affair by claiming that Leslie has a mole on her buttocks. To finally end the scandal, Leslie pulls down her pants on live television and moons Callamezzo. Since there is no mole, Dexhart is forced to admit that he fabricated the sex scandal.
Over dinner, Leslie tells Dave that she will not move to San Diego with him, as her life is in Pawnee. Dave, although sad, understands her choice and the two split up amicably. At Pawnee's tree lighting ceremony, Leslie is congratulated by everyone, including Leslie's mother Marlene, who is proud that her daughter successfully fought off the media. Leslie returns to work the next day much to Ron's immense relief, as he could barely handle just a portion of her daily duties. Everyone is visibly glad that Leslie is back.
In a B plot, April asks Andy what to get her gay boyfriend for Christmas. All of Andy's ideas are well-meaning but dumb, although it seems that April is just happy to talk with him. To thank Andy, she gets him a Reggie Wayne jersey for Christmas. Meanwhile, Mark tells Tom that he intends to get Ann a new computer bag for Christmas, but Tom tells him that he should get diamonds. In the end, he gives her the computer bag after all while Ann gives him Pacers tickets. He then gives her a second gift, telling her she does not have to go to the game, to which Ann happily accepts.