To get some more files on Operation Testify for George Smiley, Peter Guillam pays another visit to the Circus. While accepting an arranged phone call there, he can switch some real files with a folder he brought along. Just before he wants to leave, however, he is stopped in the hallway by Toby Esterhase, who tells him Percy Alleline wants to see him urgently.
After some initial small talk, Alleline accuses Guillam of recently meeting Ricki Tarr. Guillam denies any involvement with the defector. Alleline seems convinced that Tarr is back in the country, possibly to work as a Russian agent. According to Alleline's secret source Merlin, Tarr's wife and daughter were spotted on their way to England. Before leaving, Guillam has to sign a document stating that he won't talk to anyone about Merlin or Operation Witchcraft.
On their way to Tarr's safe house, Guillam fumes about Tarr's lies, but Smiley seems happy with the news. If Merlin decides to give information about Tarr, that means there's a link between Merlin and Gerald. At the safe house Smiley confronts Tarr with his hypothesis: Tarr bought fake passports for his wife and child, arranged travel plans to England for them, and then secretly sent them elsewhere with the fake passports the Circus supplied him. The Russians would believe they had joined him in England. Tarr's violent reaction to Smiley's hypothesis confirms Smiley's suspicions. Tarr, who trusts no-one, tried to bring his wife and child to safety while he waited in Britain for Irina to return.
After the meeting with Tarr, Smiley and Guillam have dinner at a restaurant and discuss recent events. Smiley tells Guillam everything he knows about Karla, Head of the Soviet Secret Service. Karla lived in England in the thirties and recruited Gerald then. In the fifties Smiley actually met Karla once. During one of the frequent Soviet purges, Karla was ordered back to Russia from the United States. On the way, he was arrested on some trumped-up charges in India, where Smiley looked him up in prison. He offered the man anything he wanted to defect, but Karla refused to utter a word. He just took Smiley's lighter.
Searching through the files, Smiley stumbles across information that brings him to a new theory. Merlin is not one person, but a collection of sources from Moscow Centre. Apparently, Karla feeds the British Secret Service harmless information to throw the scent off really important things. Merlin probably told the Circus that Tarr was going to supply fake information about a mole in the Circus, to confuse them. It becomes clear to Smiley that he has to talk to Jim Prideaux to get the missing links...