Penrod Schofield gets into a fight with Rodney Bitts, the son of his father's boss, because Rodney torments younger and smaller Verman Diggs. Rodney lies to his father about the cause of the fight, however, stating that Penrod attacked him without provocation. When he returns home that night, Mr. Schofield scolds Penrod, sending him to his room without supper. Later, however, he learns the truth about the fight, but explains to Penrod that he must learn to be diplomatic with Rodney as he himself must be diplomatic with Rodney's father. Touched, Penrod swears his father into his junior G-man club. The next day, however, Rodney and Penrod again come to blows, and when Schofield defends his son, Bitts fires him. Later, Roy "Dude" Hanson and his gang rob the bank where Schofield worked. During their escape, they shoot and kill Verman's mother. Penrod asks his family to adopt Verman to keep him out of the orphanage. They explain that they cannot afford to do so, but after Verman runs away, the Schofields find him in the cemetery, sobbing on his mother's grave. Mrs. Schofield takes pity on Verman and arranges for their housekeeper, Delia, to care for him. Penrod, his best friend Sam, and their gang decide to help the police find the bank robbers. All except Penrod and Sam spread out to look in different areas. The two boys hear a noise in the club house, an old barn, and when they investigate, they are captured by the robbers, who have been hiding in the loft. Not wanting to be left out, Rodney sneaks into the club house and is captured as well. Verman witnesses the event and runs to bring help. Working together, Rodney, Penrod and Sam manage to knock Hanson and the criminals unconscious before the sheriff and the police arrive. The club members receive a letter of commendation from the Department of Justice. Rodney and his father are made members of the club. When the boys receive the reward for Hanson's capture, they vote to give the money to Verman so he can go to college when he grows up.