Before the swimsuit competition, Gracie walks into the dressing room where the other girls are. She is covering her swimsuit with a towel. The flag pin that is on her "NEW JERSEY" ribbon and contains the spy-cam is completely blocked by the towel. However, the agents that are watching the monitors can see all the girls in their swimsuits and are making comments about them. They shouldn't be able to see anything since Gracie is blocking the spy-cam.