When an explosion rips through the U.S.S. Enterprise's warp engine, a visiting Klingon officer is suspected of causing the disaster by providing the Romulans with schematics of the engine. An investigation begins, and Admiral Norah Satie, renowned for exposing an alien conspiracy against Starfleet, comes out of retirement to help. Based on evidence compiled by Worf, Satie quickly extracts a confession from the Klingon, J'Ddan, regarding his participation in smuggling diagrams off the ship, but he denies responsibility for the explosion. Satie's Betazoid aid Sabin confirms that J'Ddan is telling the truth, which implies to Satie that there is a co-conspirator aboard the ship.
While questioning crew members who had contact with J'Ddan in search for his co-conspirator, Sabin uses his Betazoid powers to detect that one crewman, Simon Tarses, is lying. He concludes that Tarses is one of the saboteurs. Satie insists that Picard restrict Tarses' activities aboard the ship, but the captain refuses to do so without more substantial evidence that he was actually involved. Data and Geordi later conclude that the warp engine explosion was an accident, but Satie still believes that Tarses is a traitor.
After forcing Tarses to confess that he is in fact part Romulan, Satie enlists Worf's aid in conducting a comprehensive investigation of the crewman's activities and associates. Picard is increasingly uncomfortable with the investigation and meets directly with Tarses himself. A conversation with the shaken but dedicated crewman convinces Picard of his innocence, and he appeals to Satie to stop the investigation. Satie refuses, however, informing Picard that the investigation will expand as Starfleet is sending an admiral to observe.
Angered by Picard's reluctance to aid in her search, Satie summons the captain to be interrogated as a possible traitor in a hearing observed by the Starfleet admiral. During the hearing, Picard makes an impassioned plea for her to give up the witch hunt, invoking quotes regarding freedom made by Satie's late father, a respected Starfleet judge. Consumed with finding the traitor, Satie denounces Picard for quoting her beloved father and then turns vehemently on the captain.
Satie begins to recount some of Picard's past experiences to illustrate her point that he might be a traitor. When her groundless accusations turn into an uncontrollable tirade, the room full of spectators are shocked into silence, and the Starfleet admiral walks out on the hearing in disgust. Soon afterward, the interrogation is recessed, and Worf informs Picard that the admiral has called off the hearings and that Satie has left the ship. Worf apologizes for participating in the debacle, and Picard forgives him, explaining that the price of liberty is constant vigilance.