This episode starts at a police station, in an office dedicated to something called the Laughing Man Case. It is late, everyone has gone home for the day except for a man named Yamaguchi. He is working on his computer, printing off photographs. Yamaguchi is startled when someone else enters the room, but it's only the Chief of Police, a man named Nibu. Yamaguchi asks Chief Nibu why he's here so late. Nibu says he's also working late... however, Nibu is wearing his rain coat, and it's already wet. Yamaguchi is obviously very suspicious of Chief Nibu, and when offered to go out for a drink, Yamaguchi declines, saying he's done for the day. He leaves, with the photos he printed off. On his way out of the building, he mails the photos in a post box.
Togusa is working at his deck when he receives a phone call. It's Yamaguchi. It seems that back when Togusa was a regular cop, the two had been colleagues, but the two have not spoken to each other in a while. Yamaguchi says he needs to talk with Togusa and asks if they can meet now, even though it's so late. Togusa agrees, but asks what's happening. Yamaguchi explains that he's working on the Laughing Man case, but there are strange things going on from within the investigation, going on at a very high level. He needs to talk in person, and says he'll meet Togusa in an hour. Togusa agrees, and hangs up.
Yamaguchi shifts into high gear in order to get to Togusa faster, but suddenly, his eyes cloud over. Yamaguchi yells about an "interceptor" being in his eye. He is blinded, his car spins out of control, it crashes through the barrier of the overpass it's driving on, hitting the road below, and bursting into flames.
It's morning now. In Section 9's rest area Saito is reading the paper, and Togusa is sleeping on the couch. Ishikawa walks in and asks why Togusa is sleeping. Saito informs Ishikawa that Togusa was up all night waiting for someone. Ishikawa has a package that arrived for Batou, more exercise equipment. Saito and Ishikawa wonder about how a cyborg like Batou would get any use out of exercise equipment. Togusa wakes up and notices something on the paper Saito was reading. The headlines talk about how a police officer was killed on the highway the night before - this of course is Yamaguchi.
Togusa goes to Aramaki and Kusanagi about what has happened. It is obviously very alarming for someone who wanted to talk about suspicious dealings regarding high ups at the Central Office to die on the way to doing so. Though Aramaki and Kusanagi think it might just be a coincidence, Aramaki decides that even if it was, Yamaguchi thought he was on to something, and that warrants investigation. He gives Togusa three days to investigate. Togusa thanks Aramaki and leaves. Kusanagi and Aramaki talk about the Laughing Man case. It was a complex incident, the biggest case of corporate terrorism since the war. Many powerful companies were threatened, which is why the case is still being investigated, even though it happened years ago. No one has any real idea on why the threats occurred on these companies. No one knows who did it, or if there was more than one person who did.
Togusa attends Yamaguchi's funeral, where he meets Yamaguchi's widow. She has something from him. The photos that Yamaguchi mailed. They had been mailed home, with a note saying to give them to Togusa. Togusa takes them to investigate, but he can't find anything unusual about them. They all seem like very ordinary pictures, pictures from every day life, nothing unusual. Looking at one picture of a woman in bed, Togusa is reminded of his wife, and phones home to tell her he won't be able to be there until later. Kusanagi watches him silently from the door way. Togusa decides to go wash up before looking at the pictures again. He brews himself some coffee, and walks past a mirror... when something occurs to him, and he runs back to the photos. He notices that in the reflections of the photos, there is no camera present. The pictures were taken from the first person point of view of this man, but there was no camera.
Togusa goes to a diner to meet with another member of the Laughing Man Case Investigation, a man named Fukami. This is the same man in some of the pictures that Togusa was looking at, and this is why Togusa wanted to meet with him. Togusa asks why Fukami didn't go to Yamaguchi's funeral. Fukami explains everyone at HQ is busy right now. Togusa assumes that there must be a lead then. Fukami decides that since Togusa would probably be able to look up information on the case if he wanted to, there's no harm in talking about it. They have a lead on one suspect. A man who has a grudge against Serrano Genomics, the first company targeted in the Laughing Man case, a maker of micro machines. They have some evidence on this suspect, but the high ups are conflicted on making an arrest. They are working on getting more evidence using something called an "Interceptor." An Interceptor is a device that intercepts someone's visual signals, basically you could be able to see anything from the eyes of a person who has an interceptor implanted in them. Interceptors were made legal three months ago for use by police. The Laughing Man Investigation Team hopes to have one implanted on the suspect when he next goes for any kind of medical exam. Then they could monitor him and get more evidence. Togusa realizes where the pictures Yamaguchi sent him are from.
The pictures were from Interceptors that were implanted in members of the Laughing Man Case Investigation, in order to monitor them. This is why they were all first person and all reflections showed no cameras. This was the suspicious activity that Yamaguchi knew the higher ups were doing. Interceptors are not illegal... police can use them if they fill out the proper papers, and have the presence of a third party. But Togusa has found nothing that shows that this has been done in this case. Furthermore, interceptors are made by Serrano Genomics, the first victim in the Laughing Man case. Section 9 all agrees something is definitely not right here... but they don't have any evidence. Kusanagi decides she knows just the right way to shake things up.
Kusanagi, in thermoptic camo sneaks into a seedy bar, somewhere near downtown. The cyborg bartender knows her. She gives him a slip of paper, and tells him to give it to a reporter customer when he can. She warns him not to slip it to any reporter associated with the government. The bartender says he has no customers like that, but when Kusangi makes threats, he quickly changes his mind. She tells him she'll give him is money in cash, as usual. He takes the paper, and thanks her, offering her a drink and to stay a bit. Kusanagi makes a comment about how his alcohol is watered down, and leaves.
Chief Nibu leaves for work when he's confronted by a reporter, the reporter asks all kind of questions about the Interceptors and how there rumors they're being used on the officers investigating the Laughing Man case. Nibu is furious over this, he grabs the reporter's camera and leaves. Unfortunately for him, the reporter's partner was in a nearby car, taking pictures of him doing this.
The news hits the papers, a high up person on this conspiracy, Superintendent-General Daido, realizes that Aramaki and Section 9 must be behind all this. He talks about it on the phone to someone. He tells them they can simply fix it by pinning the blame all on Chief Nibu, and will hold a news conference tomorrow personally with other senior police officials.
The next day, Section 9 is all ready to hear the news conference. They watch it on TV from the rest area. When Aramaki sees Daido, he mentions that he was the head of the police district back when the Laughing Man case first occurred... there is still something going on inside the police that they want to keep hidden. At the news conference Daido explains internal affairs has investigated the Interceptor suspicions raised by the media. He says Chief Nibu acted on his own, the Interceptors were placed in the agents secretly in order to help gather more information, as it was stuck. Nibu is sorry for what he did, but blames it on stress of the case. He is to be given a disciplinary dismissal. The reporters aren't happy with this story. They know that there are links with Serrano and want to know more about them. Interceptor law was revised three months ago, and it was these senior officials who pushed for it. It's also revealed that Dadio plans on moving to Holland when he retires, which is where Serrano's parent company is headquartered. The reporters argue and debate with Daido.
Section 9 watches this all on TV. Batou notices something, the camera moves weirdly, over to Takeda, another senior official, who stands up, shaking. Suddenly, a giant logo of face, a smiling man in a baseball cap is digitaly inserted over Takeda's face. Takeda's brain has been hacked by the Laughing Man - it is the Laughing Man who is talking now. The Laughing Man says how Daido has not changed, he says how he has been aware of what Daido has been doing, and it makes him mad. He doesn't like interfering with Daido, but after Daido's horrible misdeed, he is left with no choice but to challenge "them all" again. The Laughing Man threatens Daido, unless in three days, when attending a graduation celebration, he comes clean about his crimes, Daido will be assassinated. With that, the Laughing Man releases Takeda, who falls to the floor.
The television signal that Section 9 is watching suddenly changes to the Laughing Man logo. This case has just gotten very complex.
Trivia/Did You Notice?:
You can someone who looks like Laughing Man in raincoat and hat in the streets outside the bar Motoko goes to drop information to. This is right after the scene where Togusa reveals Interceptor details to Section 9.
Togusa looking at the photos is very similar to a scene in Blade Runner.
The Laughing Man logo, with the text "I thought I'd do was pretend I Was one of those deaf-mutes" is a quote from The Catcher in the Rye.
