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NSA official Thomas Brian Reynolds meets with U.S. Congressman Phil Hammersley (R-NY) in a public park to discuss support for a new piece of counterterrorism legislation the U.S. Congress is pushing that dramatically expands the surveillance powers of intelligence agencies over individuals and groups. Hammersley remains committed to blocking its passage, wanting to protect U.S. citizens' privacy. Reynolds, wanting the bill passed to help fast-track a long-delayed promotion, has Hammersley murdered, making it appear he suffered a heart attack. Meanwhile, labor lawyer Robert "Bobby" Dean is involved in a case involving Mafia kingpin Paulie Pinero. Bobby meets with his ex-girlfriend, Rachel Banks, who works for "Brill," who Bobby occasionally hires for undercover surveillance. She delivers a tape incriminating Pinero.

As police investigate Hammersley's murder scene, Reynolds' men notice a biologist swapping out a tape from a remote wildlife camera stationed across the lake. They identify the biologist as David Zavitz. When Zavitz views footage of the congressman's murder, he immediately contacts a journalist friend. Reynolds' team intercept the call and rush to Zavitz's apartment. Zavitz transfers the video to a disc and hides it in an electronic game device before fleeing.

Zavitz bumps into Bobby, his old college friend. Panicked, Zavitz slips the disc into Bobby's shopping bag without his knowledge and runs off. While being chased, Zavitz collides with a fire truck and is killed; Zavitz's journalist friend is also murdered. Reynolds' team identify Bobby and believe he has the video. Posing as police officers, they arrive at Bobby's house wanting to search his recent purchases. When Bobby refuses, they later plant surveillance devices in the house and on Bobby's clothing. They disseminate false evidence implicating Bobby of working for the Mafia, money laundering, and having an affair with Rachel Banks. The subterfuge destroys Bobby's life: he is fired, his bank accounts are frozen, and his wife, Carla, throws him out.

Bobby initially believes Pintero is behind the smear campaign as revenge. He believes Brill, Rachel's contact, can help him and asks her to arrange a meeting. The NSA, monitoring his call, sends an impostor to intercept Bobby. The real Brill rescues Bobby and warns the NSA is pursuing him. Brill removes the tracking devices in Bobby's clothing. The NSA agents later kill Rachel solely to frame Bobby.

Bobby obtains the disc and Brill identifies Congressman Reynolds. The NSA locates and raids Brill's secret warehouse. Brill and Bobby escape but the disk is destroyed. Brill's real name is Edward Lyle, a former NSA communications expert stationed in Iran during the Iranian Revolution. His partner, Rachel's father, was killed, but Lyle escaped, and has been working covertly ever since, employing Rachel as a courier. Lyle urges Bobby to go underground, but he wants to clear his name.

Bobby and Lyle trail U.S. Congressman Sam Albert (R-NH), who also supports the surveillance bill, videotaping him with his mistress. Bobby and Lyle "hide" one of the NSA's listening devices in Albert's hotel room so he will find it and launch an internal investigation into his being bugged. Lyle focuses unwanted attention on Reynolds by depositing large sums of money into Reynolds's bank account to appear as a bribe payments.

Lyle arranges a meeting with Reynolds to exchange the video and to get Reynolds to incriminate himself. Reynolds' men instead ambush the meeting and hold Lyle and Bobby at gunpoint, demanding the tape. Bobby lies and says the Hammersley murder footage is with Pintero, knowing that Pintero's restaurant is under FBI surveillance. Bobby and Reynolds enter Pintero's. Speaking ambiguously, Bobby confuses both Pintero and Reynolds about the two different video tapes. The encounter escalates into a deadly shootout, killing Pintero, Reynolds, and the NSA agents. During this ordeal, Lyle uses subterfuge to prod the FBI surveillance agents into raiding the restaurant. Lyle, disguised as a cop, slips away while the FBI rescues Bobby and uncovers the entire conspiracy.

The U.S. Congress abandons the bill to avoid a national scandal, covering up the NSA's involvement to preserve the agency's reputation. Bobby is cleared of all charges and reconciles with Carla. Lyle sends Bobby a "farewell" message via his TV, partially showing himself relaxing on a tropical island with his cat, Babe.

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