Mme. Colet, the lovely, vain, wealthy owner-executive of the Colet Perfume Company frivolously and impulsively purchases an expensive, diamond-encrusted evening bag for 125,000 francs ("But it's beautiful. I'll take it") after passing up a less expensive 3,000 franc bag (which she declines because the price is "entirely too much.") Although the self-indulgent lady is extremely wealthy, a series of diagonal and vertical swipes illustrate that she is also a woman to be reckoned with. A shop proprietor, her chauffeur and house servants cater to every desire:

Shopkeeper: How do you do, Mme. Colet?
Shopkeeper: Goodbye, Mme. Colet.
Chauffeur: Yes, Mme.
Servant: No, Mme.
Female Maid: No, Mme.
Gardener: Yes, Mme.

Mme. Colet's character is defined in the last two encounters in the sequence, with suitors - Francois Filiba (the robbery victim in Venice) and then golf-playing Major (Charles Ruggles). In a rhythmic tone, she self-assuredly and with equal determination rejects both of their proposals of marriage:

(To Francois) No, no, Francois. I tell you, no! You see, Francois, marriage is a beautiful mistake which two people make together. But with you, Francois, I think it would be a mistake. (a vertical wipe to the right)
(To the Major) Don't be so down-hearted, Major. You're not the only one I don't love. I don't love Francois either. (a diagonal wipe to the left)

Nonetheless, the two competitive, elderly male suitors join together with Mme. Colet to take her to the opera where she has her own private box, but they end up quarreling over her. During the operatic performance, a pair of opera glasses [held by a high-class, unemployed thief - Gaston] are aimed at Mme. Colet's 125,000 franc precious handbag encrusted with jewels. As a soprano sings, "I love you," the pages of the conductor's musical score flip over to symbolize the passage of time. The key of the singing shifts from major to minor, as she continues singing: "I hate you." The chorus responds: "She hates him."

Just before the operatic finale, Mme. Colet is victimized - her handbag is missing and presumed lost. When the opera house has been emptied, a suspicious-looking Gaston Monescu emerges from behind the "Messieurs" door. The next day, the Major is seen framed as he stands outside a window display case of a ladies' shop. The two like-minded, rival suitors for Mme. Colet's hand in marriage are embarrassed to find themselves both inside the same proprietor's shop inquiring about a replacement handbag.

Over breakfast in their simple Parisian hotel room after a year's passage of time since their introduction to each other in Venice, Gaston and Lily read behind newspapers, suggesting their estrangement over time and their desperate financial situation. Lily sneaks a dunk of her roll into her coffee when Gaston is not looking - the gesture indicates her petty-bourgeois, populist origins and her aspirations to climb the social ladder. To assure her, he sardonically mocks President Herbert Hoover's promise:

Gaston: Everything will be all right again. Prosperity is just around the corner.

Lily discovers a press advertisement - an offer of 20,000 francs reward for the return of Mme. Colet's lost evening bag.

HANDBAG LOST
Twenty Thousand Francs Reward

TWENTY THOUSAND Francs Reward for person who delivers handbag lost last night at Opera Comique. Handbag decorated with diamonds and sapphires.
Clasp also contains 3 little diamonds. Bag is property of Mme. Colet.

Lily encourages the resourceful Gaston to "be honest about it" and return it - for the reward. She may fear that his theft of Mme. Colet's handbag may initiate a sexual relationship with another woman. [The title of the play that was adapted for the film's screenplay - The Honest Finder - refers to the person who finds the handbag and 'honestly' returns it.]:

Gaston: Twenty thousand francs? If I sold it, I would get...Well, it's worth 40,000 at the most. She paid probably 60,000. If I sold it, I would get 5,000.
Lily: Well darling, then I'd be honest about it and return it to the lady.
Gaston: And take the 20,000 francs?
Lily: Right.

In a two-shot of Mme. Colet and a poor old lady, Mme. Colet hands back a beaded, bedraggled-looking handbag: "No, I'm sorry, but that's not the bag." The glaring, opposing contrast between the rich and poor is poignantly striking. A brief, long shot views the expansive parlor of the luxurious Colet mansion, where many inelegant-looking people have gathered to return handbags to Mme. Colet and claim the reward. One of the hopeful is an unkempt, bitter, fanatical Marxist Bolshevik male (who doesn't even have a handbag) who confronts Mme. Colet over her bold-faced affluence, hurling ineffectual "phooeys" at her:

Bolshevik: So you lost a handbag, Madame?
Mme. Colet: (nervously) Yes.
Bolshevik: And it had diamonds in the back.
Mme. Colet: (impatiently) Yes.
Bolshevik: And diamonds in the front.
Mme. Colet: Yes.
Bolshevik: Diamonds all over?
Mme. Colet: Well, have you found it?
Bolshevik: (in a frenzied explosion) No! But let me tell you - any woman who spends a fortune in times like these for a handbag - Phooey! Phooey! and Phooey!
Jacques, the Butler (Robert Greig): (intervening) I must ask you -
Bolshevik: (not through yet) And as Leo Trotsky said, 'Kashdaya damitchka...' (pounding his hand with his fist to emphasize his tirade, word for word -) (Any woman who spends a fortune for a silk purse is a sow's ear.) (Translating into English) And that goes for you too!

Suddenly, Gaston makes a dramatic, unannounced entrance - easily penetrating into her house. He speaks Russian in a demanding tone to the Bolshevik, silences him and forces him to leave. By passing everyone, he hands over the stolen bag to claim the cash reward (higher than if he had sold it outright). After telling Jacques to dismiss all the other people in the hall, Mme. Colet turns toward Gaston, but he has disappeared into thin air. Disoriented by his change of position in the room, she finds him admiring a valuable Chinese statue. With an impeccable style and seductively-polite manners, he smoothly intrudes into her life and presents himself under an alias name:

Gaston: ...I am Monsieur LaValle, if you would allow me to introduce myself.
Mme. Colet: How do you do, Monsieur LaValle? (She extends her hand for a kiss)
Gaston: The pleasure is mine, Madame.

The duplicitous thief flirts with and charms his new female victim by emptying her purse (to prove that the contents are indeed hers) and learning its safely-guarded secrets, and claiming to have read one of her love letters (without perfumed "bouquet") from the Major:

Gaston: A lady as charming as you would and should get love letters.
Mme. Colet: Monsieur LaValle.
Gaston: But one suggestion. Not the Major. I don't mind his grammatical mistakes. I will overlook his bad punctuation. But the letter has no mystery. No bouquet. And one lipstick.

To satisfy her narcissism, Gaston offers her cosmetic advice about her choice of lipstick color: "Scarlet No. 4!?...With your skin, I prefer crimson." And then he consults with her about her powder shade: "(Peaches and creme) That's too dark!"

Both the Major and Monsieur Filiba arrive to court Madame, but they are turned away (first through Gaston's manipulations and then by the butler):

Major: Oh Jacques, has the bag been found?
Butler: Yes, Major.
Major: Is Madame feeling well?
Butler: No, Major.
Major: Is Madame seeing anybody this afternoon, this evening, or even tomorrow?
Butler: No, Major.
Major: You may shut the door, Jacques.

Although wishing to ignore the whole matter of the cash reward, Gaston/LaValle reluctantly agrees to accept it as a member of the nouveaux riche - now the nouveaux poor - with the collapse of the stock market:

Gaston: ...It embarrasses you to offer me the 20,000 francs reward.
Mme. Colet: Yes.
Gaston: Don't be embarrassed. I'll take it. I need the money. I wish I were in a position to ignore the whole matter, but you know Madame, the stock market, a bank crash. To make a long story short, a member of the nouveaux poor.
Mme. Colet: Well, I'm glad I lost the bag. I'll write you a check immediately.

While charming her with his wit, cool professionalism, honesty, feigned elegance and appreciation of her antique possessions, he insinuates himself into her household.

Gaston: (from the foot of the stairs) Mme. Colet?
Mme. Colet: (from the top of the stairs) Yes, Monsieur LaValle.
Gaston: Do you know my first name?
Mme. Colet: No, what is it? Tell me.

He briskly bounds up the stairs to her [hampered by a wooden leg, Herbert Marshall had a double for the film's stair scenes] and intimately tells her his first name:

Gaston: Gaston. And you know what I would like you to do with that check?
Mme. Colet: What?
Gaston: Make it out to 'Cash.'
Mme. Colet: As you like.

He follows her into her upstairs bedroom. While she is searching for a misplaced checkbook, he again disappears from her point of view. [Lubitsch's empty frame and her disorientation/loss of control over him is linked to his acts of thievery and magical disappearance.] She finds him in her former secretary's bedroom admiring the attractive, ornate, antique headboard [the bed illustrated in the film's title sequence] - he's actually casing the joint. The former secretary was fired for enjoying the antique bed a bit too much, according to Mme. Colet: "Too happy. That's why I discharged her." He has also located the prized safe in the bedroom.

When Mme. Colet is persuaded to look for the checkbook in her wall safe, he records (for memory) the numbers of the lock's combination. To her surprise, she finds 100,000 francs in her home safe but her checkbook is not there. Naturally, he encourages her to keep cash on hand, while reprimanding her for being fiscally irresponsible. As they sit together on a love seat, she passively encourages him to "handle" her money - and submits to him sexually. He sets her up - with shrewd "business" sense - to be his next victim - and convinces her to immediately hire him as her new personal secretary:

Gaston/LaValle: In times like these when everything is uncertain, every conservative person should have a substantial part of his fortune within arm's reach.
Mme. Colet: Um, hmm. That sounds sensible. Hm, hmm. Yes. Very sensible. Very very clever.
Gaston/LaValle: Madame. I think you deserve a good scolding. First, you lose your bag.
Mme. Colet: Then I mislay my checkbook.
Gaston/LaValle: Then you use the wrong lipstick.
Mme. Colet: And how I handle my money.
Gaston/LaValle: It's disgraceful.
Mme. Colet: Tell me, Monsieur LaValle. What else is wrong?
Gaston/LaValle: Everything! Madame Colet, if I were your father, which fortunately I am not, and you made any attempt to handle your own business affairs, I would give you a good spanking (she turns toward him) - in a business way, of course.
Mme. Colet: What would you do if you were my secretary?
Gaston/LaValle: The same thing.
Mme. Colet: (She leans back provocatively and smiles sensuously.) You're hired.

As her trusted, confidente secretary, he begins to take a powerful, controlling hand in the perfume company and in Mme. Colet's business and personal affairs, exemplified by slavish obedience to his wishes. The quick montage of scenes, each divided by wipes, recalls an earlier scene showing Mme. Colet's empowerment:

Giron: ...We'll think it over, Monsieur LaValle.
Insurance Agent: ...Thank you, Monsieur LaValle.
Cook: No potatoes, Monsieur LaValle?...Yes, Monsieur LaValle.
Jacques: Yes, Monsieur LaValle.
Chauffeur: No, Monsieur LaValle.
Servant Maid: (flirtatiously) Maybe, Monsieur LaValle.
Mme. Colet: (exercising) Is this what you mean, Monsieur LaValle?

As Mme. Colet (dressed in a dark dress) leans against the middle of the wide, curving art-deco staircase within her mansion, she (his boss) challenges her single-minded employee - rigidly positioned above her at the top of the stairs - to descend and join the party guests: "Now, Monsieur LaValle, please!" But he decides to resist, hold back, and remain upstairs working.

Mme. Colet: Don't you want to come down and join the party? Just a little tango? No? Oh, you and your messy old papers and contracts, and money-money-money, all those uninteresting things.
Gaston/LaValle: They're very interesting to me, Madame. And somebody in this house should worry about money.

The next morning, Gaston/LaValle dictates to his assistant secretary - Lily. She has been hired on by him as part of their concerted plot to conspire to have the economically-vulnerable Madame Colet keep 850,000 francs in cash in her safe at home so that she can be conveniently victimized:

Gaston: Darling, that means that on the second of June, we shall have 850,000 francs.
Lily: And her jewelry's worth a fortune!
Gaston: No jewelry. Hands off jewelry! If we're broke, all right. I can pick up a million franc necklace. But in times like these, we're running a cash business. Why take a chance with jewelry?

Lily is unexpectedly called by Madame Colet to come to her room. Lily straightens her dress belt and cuffs, as Gaston primps her hair and pats a curl into place. And then, as a last finishing touch, he quickly and deftly zips up the front of her dress. At Madame Colet's bedside as the lady of the house has 'breakfast-in-bed,' Lily plays up her role as an ugly, unfortunate orphan who must take care of a little brother:

Lily: You see, Mother is dead.
Mme. Colet: Yes, that's the trouble with Mothers. First you get to like them, and then they die.

Within reach of sparkling jewels dripping temptingly in her sight, Lily must literally sit on her hands to resist the temptation of pocketing them - her usual activity. A dunking gesture with coffee is repeated by Madame Colet during breakfast, linking the two females together - one blonde and one brunette - in an amorous romantic triangle with Gaston.

Mme. Colet expresses worry over Monsieur LaValle's compulsive, hard-work habits, arousing Lily's jealousy over her alluring romantic interest in him:

Mme. Colet: ...He works too much. He's chained to his desk. Too much detail. Now, uh, if you could take over some of his work...
Lily: ...so he wouldn't be so confined to his office...
Mme. Colet: Yes. Then he'd have a little more time for...
Lily: ...for all the really important things...
Mme. Colet: Right!
Lily: I'll do my best, Madame, even if I have to work every night!
Mme. Colet: Oh, no. No, my dear child, that's ridiculous. You go home as usual - five o'clock every day. Now I'm gonna be a little bit of a tyrant. I insist. It'll be nice for your little brother, too. Five o'clock. Remember.

Lily's salary is raised from 300 francs to 350 francs, in exchange for her prompt departure each day at five o'clock: "In times like these, most people are cutting salaries, but in your case, suppose we say 350?" Lily is fearful of the sexual temptations that Gaston faces in working for Mme. Colet, and the effort Mme. Colet is taking to insure their privacy after-hours:

Gaston: Well, what did she want?
Lily: YOU! And she's willing to pay as high as 50 francs.
Gaston: What?
Lily: But it's not enough.