James investigated Ted Beneke over unreported income in the accounts of Beneke Fabricators. During the investigative meeting, Skyler White joined them, masquerarding as a ditzy accountant rather than her actual self. James attempted to instruct Skyler on proper procedure for reporting the company's income, but Skyler pretended she was unfamiliar with said procedures.
Skyler then lied that she used Quicken to manage the company's accounts, which astonished James. He asked Skyler what accounting experience she had, to which she implied that Ted hired her solely because of their sexual relationship and not because of any actual experience. Having fallen for the masquerade, James closed the investigation into Beneke Fabricators, believing that it was Skyler's own naivety and ignorance that led to the company income going officially unreported, which itself does not constitute a violation of the law. ("Bug")