Thanks for the help guys, I spoke with Articboy on Monday.
It's obviously an issue of water finding the path of least resisitance and making it's way in to the wall in the house that is below grade.
The down spout is right were the problem is, so I trenched a path for the water follow away from the house.
I'll dig it out and fill the cracks where 2 sections of foundation meet and seal it up real good.
Tear out drywall, dry it up and redo the dry wall, mud and tape!!
It's for my inlaws and their in their 80's.