Chumley returns to the sanatorium disheveled and paranoid, and is followed by an invisible presence. When the others arrive, Chumley invites Elwood to his office. In private, Chumley is convinced Harvey is real, and Elwood explains his various powers, namely his ability to stop time and send anyone to any destination for as long as they like. Veta arrives with Judge Gaffney and Myrtle Mae, prepared to sue the institute and commit Elwood, but are convinced by Sanderson that an injection of a serum called "Formula 977" will stop Elwood from "seeing the rabbit".