1990. A young Agent Mulder meets Arthur Dales, an FBI Agent who had worked on the X-Files in 1952. Dales had been involved in the cleansing of America from members of the American Communist Party in the McCarthy era. But Dales learnt that not all designated "fellow travelers" really were communists, and that some of them were victims of experiments of xenotransplantation conducted by a German doctor; experiments that were endorsed or done under the cover of the Department of Justice, the State Department, and FBI director J.E. Hoover. At that time, a young employee of the State Department that wanted justice to be done one day, Bill Mulder, helped Dales and Edward Skur, one of the experiment's guinea pigs.
Season 5 continues to explore the past of XF with another flashback episode after 5X01: Unusual Suspects, this one written by Spotnitz & Shiban. After failing to get Darren McGavin to play Mulder's father, Carter casts the actor who inspired him with the title role in "Kolchak" (1972-1975) as Arthur Dales, a former FBI agent who first points Fox Mulder to the X-Files back in 1990. And at that time, Mulder smokes and wears a wedding ring! These little touches added by Duchovny came as a shock when the episode aired; this could be explained ex post facto with Mulder's probable engagement to Diana Fowley at that time (see 5X20: The End), but he hadn't met the chain-smoking Cancer Man yet.
The Xenotransplantation experiments
Dr. Strohman, a German doctor, came in the USA after World War II through Project Paperclip (a photo of him shaking hands with President Truman, "A German emigre, Dr. Strohman patriated here after the war.") -- see 3X02: Paper Clip for other participants to this program. He, along with other ex-Nazi doctors, experimented with xenotransplantation in Germany and continued his work in the USA ("It's a procedure that nazi doctors experimented with during the war, and I believe that they continued their work here"). Three employees of the State Department, Skur, Gissing and Oberman, were given surgery; officially it was for war injuries, but without them knowing it they became guinea pigs for Strohman's experiment ("Skur's not a communist. He's a patriot. All of these men are patriots. [...] There were three men, veterans, working at the State Department. Skur, Gissing and Oberman.")
Xenotransplantation consists in the "grafting of another species into the human body", quite brutally if we judge from the sutures the 'creature' was attached with on the oesophagus of the deceased Gissing.
The 3 'guinea pigs' wanted revenge for what had been done to them. Gissing killed Dr. Strohman; Skur killed Dales' partner and tried to kill Dales, thinking they were part of the conspiracy against him.
Seeds of a conspiracy
This conspiracy of well-connected government officials can decide who gets to be accused to be a communist and who is not. Dales gets a report heavily censored "by the Committee, to protect the identity of the witness" when in fact there is no witness. When Gissing stroke back, he was arrested and a suicide was staged ("They think he killed his doctor and then killed himself?"). The 3 guinea pigs were labeled as communists and the FBI was sent to arrest them as any normal communist traitor.
In 1952, Bill Mulder already has seeds of discontempt over the immorality of the acts he participates in, something that will later make him rebellious amongst the Syndicate, force him to retire and finally bring his demise when he was about to tell all to his son (2X25: Anasazi). Bill Mulder: "I risked my career and my family by coming here. But the crimes these men have committed against innocent people... I can't have that on my conscience anymore. Someone needs to know the truth." Bill helps Skur escape from the hands of the govrnment, hoping that some day the truth would come out. And 38 years later, his son Fox did learn the truth. Arthur Dales is presented here as the original investigator of these X-Files -- although the name comes from FBI clerk Dorothy Bahnsen ("Plenty of room in the 'X's")! In 1X18: Shapes, Fox Mulder says that J.E. Hoover was the first one to create an X-File: "A true piece of history, Scully! The very first X-File, initiated by J. Edgar Hoover himself in 1946." And indeed, Bahnsen says "the director's office" decides which cases become X-Files.
Dales: "Do you know what an X-file is?"
Mulder: "It's, uh, it's an unsolved case."
Dales: "No. It's a case that's been designated unsolved."
Cohn: "You're not supposed to understand. You're supposed to follow orders."
Bahnsen: "They're missing but I recognize one of these names. It's in an X-file."
Dales: "An 'X-file'?"
Bahnsen: "Yes, unsolved cases. I file them under 'X'."
Dales: "Why don't you file them under 'u' for 'unsolved'?"
Bahnsen: "That's what I did until I ran out of room. Plenty of room in the 'X's."
Dales: "Who decides when a case gets an 'X'?"
Bahnsen: "The director's office. It's, uh, it's kind of a dead end. No one's supposed to see them, but it makes for interesting reading."
J.E.Hoover: "In 1945, at the time of the first conference to map out the peace, after the second world war, there lived within the Soviet orbit 180 million people. Lined up on the anti-totalitarian side at that time were 1 billion 625 million people. Today, Mr. Dales, just seven years later, there are 800 million people under the absolute domination of Soviet Russia, an increase of over 400%. On our side the figure has shrunk to around 500 million. In other words, in less than seven years the odds have changed from 9 to 1 in our favor, to 8 to 5 against us. The threat of global communist domination is a reality that can be ignored only at the risk of our own annihilation."
Dales: "The men we arrested weren't communists."
J.E.Hoover: "If we are to defeat the enemy, we must use their tools. We must go further. We must do those things which even our enemies would be ashamed to do. It is only through strength that we can make our enemies fear us, and thereby ensure our own survival. You have one chance, Mr. Dales, to save yourself, to demonstrate that you have the strength to serve your country."