Past Meets Present
- Teddy is the cop (and yes, it turns out he is actually the cop, and his name is actually John Gamel) calling Leonard.
- He meets him in the lobby and tells him about this place that Jimmy Grantz (the James G—who isn't actually Teddy) is going for a drug deal.
- Leonard meets him there (and possibly kills him), but Jimmy whispers "Sammy" and Leonard realizes this is not the John or James or whatever G. he's looking for.
- Teddy shows up and Leonard pretends not to know him, finally for the first time taking advantage of his condition. He takes his gun out and begins to question him.
- It turns out that Teddy is an undercover cop who was assigned to Leonard's case.
- He believed Leonard's story about the second man, and helped Leonard find him and kill him.
- But this happened a long time ago.
- Teddy thought that when Leonard killed the real John G. (who Teddy tells us was just some junky) he would remember it, but he doesn't. So Teddy has made up other John G's for Leonard to kill (and is apparently trying to make some money on the side by targeting drug dealers. He doesn't sound like a very good cop).
- So Teddy has only sort of been using Leonard and Natalie has been definitely using him, because he showed up in Jimmy's car with Jimmy's clothes on at her bar.
- Teddy tells us that Sammy Jankis was a fraud that Leonard exposed.
- Leonard is the one whose wife was diabetic (although the story of her death seems to be true).
- Leonard wants to stop lying to himself, and to stop Teddy from lying to him about John G., so he writes down Teddy's license plate number as a fact about his wife's killer and writes "Don't believe his lies" on the back of the photo of Teddy.
- Then he drives off, and loses his memory. And the rest, as they say, is history.