On his way to Hollywood by motorcycle, Captain America receives an update from the Black Widow on the mysterious Lotus Newmark. It seems she controlled much of the Los Angeles underworld and had legitimate holdings in the movie industry. She was caught when she used her powers to animate the massive stone statue known as "It" to battle Wonder Man and the Beast. The Widow tells him there is no information on Lotus more than six years back when she gained control of Global Studios. As Cap heads there, he wonders if Lotus Newmark could be the same Lady Lotus he faced with the Young Allies during the War….
After the riot in Los Angeles (seen in issue #1), Bucky and Toro were allowed to sit in on the interrogation of the rioters. All deny any memory of the altercation and they recall an Asian woman shortly before. The boys want to get involved but the FBI tells them to sit it out. At her headquarters, Lady Lotus, angered that her plans were frustrated by the meddling young heroes, is presented with an enormous gem by her aide Samaru. Unearthed by her agents in the Pacific, the gem would increase her hypnotic power a thousandfold….
Cap arrives at Global Studios and recognizes it as the site where he and the Young Allies made patriotic films during the War….
Back when the place was called Democracy Studios, the boys were given a tour of the New York City Street set, while making plans for an investigation in Chinatown later. Suddenly running into a band of Nazis, the Allies start a fight, until they learn that the "solders" are movie extras. A few handshakes and autographs later, the matter is smoothed over…but then Lady Lotus captures the minds of the Nazi-costumed actors. Later, after shooting the patriotic short film is completed, Toro is called to the telephone but it’s a trap and he falls under the villainess’ spell as well. As the other guys are relaxing on the set, the hypnotized "Nazis" open fire on them with real ammunition. The young heroes fight back but the biggest surprise comes when Toro appears—and traps his pals in a circle of fire, then bows before Lady Lotus….
At the studio, Cap, watching from a high vantage point, spots Lady Lotus approaching a late night excavation on a back lot. She captures the minds of the laborers and takes the large gem they have uncovered. Cap slings his shield, knocking the gem from her hands but she orders the workmen to mob Cap, affording her time to recover it. Lotus uses the gem to fire energy blasts at the hero but when she finds she can’t control his mind she shorts out the electrical system and makes her getaway in a waiting jet. As she plots to restore the gem to its full power, Cap vows to track her to the ends of the Earth.