When Sheila Carter becomes concerned that Eric Forrester is excluding her from his will, she decides she would be more financially secure if she gave Eric a child. After a one-night stand with former rival Connor Davis, Sheila goes to Eric claiming she is pregnant with his child. Eric, who had recently had a vasectomy, tells Sheila he wants a divorce. For some time she begins to see psychiatrist Jay Garvin, who is friends with Brooke Logan's fiancé, Dr. James Warwick. James suspects Sheila is hiding something from the family, and tries to pry information from Dr. Garvin. However, during a brief struggle, Sheila accidentally pushes her shrink, Jay, off a balcony and to his death. James later learns from Lauren Fenmore the secrets of her past. After attempting to drown Lauren in a hot tub, Sheila kidnaps James with the help of her new partner-in-crime, the security guard Mike Guthrie. She imprisons him in the basement of her house (known as "The Houdini House") for some time. When James escapes and her secrets finally surface, she holds James, Lauren, Brooke, Eric, Stephanie Douglas and Ridge Forrester hostage in the Forrester mansion, welcoming them to her "goodbye party." At the "party," Sheila tells everyone in attendance how they had personally wronged her, and threatens to kill them. Holding a gun to Stephanie, Sheila has a change of heart when the others step in front of her, and swallows a bottle of poison. Having survived, Sheila is placed in a psychiatric hospital, under the care of Dr. Brian Carey, but does not remain there for long, despite Stephanie's attempts to keep her there. Sheila tries to revive her friendship with Brooke, who sides with her at first, but later wants nothing to do with her. She begins dating neighbor Grant Chambers, and later her psychiatrist James. She continues to see James at this time, and memories of her abusive childhood are revealed. Sheila confesses that she murdered her father by poisoning him.