Stanley takes a cold and quick shower. There is no hot water and each boy is allowed only four minutes under the water, which then turns off automatically. Stanley eats a disgusting dinner, and a camper asks him what he got in trouble for. Stanley tells him that he stole a pair of sneakers from the famous baseball player Clyde "Sweet Feet" Livingston. No one believes that Stanley has done that. When Stanley retires to his smelly cot he thinks back on the crime he didn't commit. The day Stanley was arrested, the school bully, Derrick Dunne, had thrown Stanley's notebook in the toilet in the bathroom. The teachers never believed that Derrick bullied Stanley because Stanley was much bigger than Derrick.
After Stanley got his notebook out of the toilet, he had to walk home because he had missed the bus. While Stanley was walking, a pair of shoes had fallen from a freeway overpass, and hit him on the head. Since his father was doing experiments with sneakers, Stanley ran home to give them to his father. The shoes had smelled very bad. Because he was running, a police car pulled him over and took the shoes. Stanley later found out that the shoes belonged to Clyde Livingston and had been donated to a homeless shelter to raise money. Clyde Livingston himself lived at the homeless shelter once when he was younger. Stanley was convicted of stealing the shoes and sent to Camp Green Lake.
Stanley has a hard time digging his first hole. The ground is hard and he quickly develops painful blisters on his hands. Mr. Pendanski tells Stanley that he must dig a hole to build character, but that if he finds anything interesting he must tell a counselor because the Warden likes to know about interesting finds. More of Stanley's family history is revealed in this chapter. Stanley's great-great-grandfather was from Latvia and his name was Elya Yelnats. When he was fifteen he fell in love with a pretty fourteen year old girl named Myra Menke. Elya wanted to marry Myra but so did Igor Barkov, a fifty-seven year old pig farmer. Elya cannot offer Myra's family a pig like Igor can so he visits his friend, Madame Zeroni, an old Egyptian woman with only one foot. Despite the fact that most other boys in the village liked to mud wrestle, Elya prefers to listen to the stories that Madame Zeroni tells him.
Madame Zeroni tries to dissuade Elya from seeking to marry the dimwitted and weak Myra. Madame Zeroni advises Elya to go to America as her son has. Elya continues to be sad so against her better judgement Madame Zeroni gives Elya a small pig to take care of. She teaches him a song and tells him that he must carry the pig up a mountain where there is a stream with water that runs uphill. He must sing the song to the pig and let it drink from the water. If he does this every day then the pig will grow. She also makes Elya promise that after he shows the pig to Myra's father he must carry her, Madame Zeroni, up the mountain and sing to her. If he does not, then she says she will put a curse on his family.
Elya promises to fulfill all of Madame Zeroni's requests, but on the day that he brings the pigs to Myra's house he realizes that Myra is very stupid and that she doesn't care who she marries. Disillusioned, Elya gets on a boat bound for America, forgetting his promise to Madame Zeroni. In America he learns English and marries a woman who is strong and smart. He teaches her the song that Madame Zeroni taught him, about a woodpecker and a wolf who wish their life was easier. Elya and his wife have a son who they name Stanley Yelnats because they like that Stanley is Yelnats spelled backwards. Even though they all work very hard, they have a lot of bad luck in their lives and Elya begins to believe that Madame Zeroni has cursed him.
Holes explores the different ways in which people are viewed by themselves and by others. While the authorities view the unfortunate Stanley as a criminal, the boys at Camp Green Lake, themselves delinquents, cannot believe that Stanley could or would steal a famous baseball player's shoes. Similarly, while Stanley feels persecuted by Derrick Dunne, the class bully, the teachers at his school believe that Stanley's size would make it impossible for a smaller boy to pick on him. Following this vein of thought, Stanley and his family think of Elya Yelnats as a good-for-nothing pig stealer but when the narrator reveals Elya's full story, it is clear that he is really just a lovelorn man who made an unfortunate, unintended, error.