MOLEHUNT The Secret Search for Traitors That Shattered the CIA By David Wise Random House. 325 pp. $22

MOLEHUNT examines one of the most bizarre chapters in the history of the Central Intelligence Agency: the search for a Soviet agent that obsessed the CIA during the 1960s and crippled the operations of its Soviet Bloc division.

The story told here is hard to believe, even for readers who have grown up on John le Carre's tales of George Smiley, especially Tinker, Tailor, Soldier, Spy which focuses on the hunt for a mole inside British intelligence. But David Wise's account is carefully documented and based almost entirely on on-the-record interviews with former CIA officers.

Wise describes an agency so consumed by the molehunt -- and the culture of secrecy and paranoia that had spawned it -- that the CIA literally became its own worst enemy. The spymasters were so spooked during the mid-1960s that they stopped mounting aggressive espionage operations, stopped recruiting KGB agents and stopped believing some of their own most senior officers. Soviet KGB defectors became so suspect that one was illegally imprisoned in conditions that approached torture and another was thrown back to the Russians. Both men, it now seems clear, were legitimate defectors.

The molehunters turned the agency inside out trying to find the spy in their midst. According to Wise, they screened more than 120 CIA officers as possible suspects, narrowed that list to 50 serious suspects, and finally focused on 16 to 18 potential espionage "cases." The careers of many of these "suspects" were wrecked, and in the climate of universal suspicion, the agency's own efforts to recruit Soviet agents came to a virtual halt. Indeed, some CIA officers who were still eager to recruit Soviets during the mole-mania came to be suspect, for that very reason! Yet not a single one of these cases against CIA officers -- repeat, not a single, solitary one -- ever proved out. The entire episode amounted to a massive self-inflicted wound.

The Captain Ahab of this particular harpooning venture was James Jesus Angleton, the legendary chief of the CIA's counterintelligence staff. Angleton was an irresistible character: Tall and thin, stooped as if weighted down by the store of secrets he had accumulated, he looked the very image of a spymaster. By Wise's account, he exerted the same charm on a generation of CIA officers that he did later for a generation of journalists and biographers.

The problem was that much of the time, this brilliant, charismatic man was dead wrong about things. He had been wrong in the 1950s, for instance, in trusting the loyalty of his British friend Harold "Kim" Philby, who turned out to be a KGB spy. And he proved disastrously wrong when he finally met his match in the paranoia derby, the KGB defector Anatoly Golitsin.

Golitsin surfaced in 1961 in Helsinki. He claimed to have the kind of information the CIA most prizes -- and most dreads -- from defectors: evidence that the agency itself had been penetrated. Golitsin said that there was indeed a Soviet mole inside the CIA, and he offered some tantalizing clues about his identity. The mole was of Slavic background; he had been stationed by the CIA in Germany; his KGB codename was "Sasha," and his last name began with the letter "K."

Angleton spent the next 12 years, until he was forced into retirement, pursuing this chimera. He formed a special team of mole hunters to pursue Golitsin's leads, known as the "Special Investigations Group," with virtually unlimited powers of inquiry. He gave Golitsin the CIA's own most secret files to fuel his speculations. He continued to indulge Golitsin even when he began dishing out what most people would regard as sheer nonsense, such as allegations that British Prime Minister Harold Wilson and U.S. diplomat Averell Harriman were both KGB spies. In the airless, windowless crypt of secrecy within which Angleton operated, there was no way for common sense to penetrate. And so the ruinous molehunt ground on.

Wise's account is not the first word of these extraordinary doings. The story has been emerging in bits and pieces for the past 15 years. David Martin, now a CBS correspondent, began to tell the tale in his pathbreaking 1980 book, A Wilderness of Mirrors. British journalist Tom Mangold added a wealth of new detail last year in his superb biography of Angleton, Cold Warrior. Indeed, many of the details in Molehunt will be familiar to those who have read Mangold's biography. What Wise has done is to focus on the chase itself, and its victims. That is what makes his account so readable, and so devastating.

Wise is at his best in describing the human consequences of this molehunt -- the price paid by the individual CIA officers who were its targets.

A poignant example is Peter Karlow, whose promising CIA career was ruined by the investigation. Karlow's sin was that he fit Golitson's bill of particulars. His background was Slavic, he had served in Germany, and his last name began with K.

The fact that Karlow was also a war hero who had lost a leg fighting for the United States in World War II and that he had an unblemished record with the CIA were irrelevant. So was the detailed evidence that emerged of Karlow's innocence, such as the polygraph examinations administered by the FBI and the refutation of various specific charges. Angleton wasn't interested in counter-evidence. Karlow, recognizing that he was powerless to fight the accusation and that his CIA career was over, resigned from the agency in 1963.

Another poignant case was that of the agency's first chief of station in Moscow, Paul Garbler. He became a suspect even though his last name didn't begin with K, largely because he had handled an agent in Germany whose name did begin with K -- one Franz Koischwitz, better known as Igor Orlov. (About him, more later.)

The evidence against Garbler was as flimsy as that against Karlow, but the agency still concluded that he was a grave security risk. He was moved off the fast track and spent eight years in the boondocks: First as deputy director of the CIA's training facility in Williamsburg, Va., known as "the Farm," then as chief of station in Port of Spain, Trinidad.

Failure to find the mole only pushed Angleton and Golitsin to greater extremes of paranoia. The head of the Soviet Bloc division, a man named David Murphy, briefly became a suspect. So did his chief of operations. And so too, tragically and inevitably, did Angleton himself. One of his molehunters, who had spent years barking up dead ends at Angleton's behest, finally pointed the paranoia-gun at his master. He reasoned that if you began (as Angleton did) with the assumption that there was a Soviet penetration agent high up in the CIA, then wasn't it possible that the culprit was the very man who had launched the paralyzing molehunt in the first place -- a man who seemed almost to take orders from a mysterious Russian named Golitsin? That was the measure of Angleton's folly: that his method could ultimately be used against him.

The only real spy the molehunt may have nailed wasn't a CIA case officer at all, but Garbler's agent in Germany, Igor Orlov. This former KGB officer, "a little china doll of a man," as Garbler remembered him, had escaped to West Germany after World War II. He was hardly a master espionage agent. His main job for the CIA was running 11 prostitutes and a piano player at a bar in East Berlin that was frequented by Soviet soldiers. Yet Angleton seemed convinced, to the end of his days, that Igor Orlov was the key to the puzzle.

The Orlov case provides my own small connection to this story. In 1979, when I was covering the CIA for the Wall Street Journal, I lunched several times with Angleton at his club in downtown Washington. I was hardly alone; Angleton seems to have dined with half the press corps in that period. Perhaps he was bored with his fellow CIA retirees.

In any event, after he had smoked dozens of his beloved Virginia Slims, Angleton told me that he was going to confide a great secret -- the key to the puzzle. He proceeded to tell me the story of a KGB defector who had worked for the agency in Germany but had remained loyal, all the while, to the KGB. Angleton insisted that this man, who now ran a picture-framing shop in Alexandria, was the real mole, the real Sasha, the real fruit of the ten-year molehunt. His name was Igor Orlov.

I bounded off to see Orlov at his shop in Alexandria and listened to him explain the complicated story of his life with the KGB and the CIA. I asked him about the various incriminating things he had supposedly done since retiring as a CIA agent, such as visiting the Soviet Embassy in Washington, and he wearily answered my questions. His wife later explained that he had agreed to talk to me only because he assumed that despite my claim to work for the Journal, I was really another of the FBI agents who had been quizzing him for years about such matters.

I later wrote about Orlov and his role in the great molehunt, noting the FBI's conclusion at that time that maybe he had been a mole, but then again, maybe he hadn't. The case against him strengthened somewhat a few years later when a KGB defector named Vitaly Yurchencko surfaced and said, among many other things, that Igor Orlov had indeed been a Soviet agent. Maybe so. But I remember thinking back in 1979, as I walked out of Igor Orlov's picture-framing shop, that even if he was guilty, he was a rather puny prize for all the effort that Angleton and his colleagues had expended.

Molehunt tells a Cold War story that is depressing even by the shades-of-gray standards of spy fiction. In the end, our real-life George Smiley didn't get his man. And it wasn't Karla who did the gravest damage to our operations against Moscow, it was Smiley himself.

David Ignatius is the foreign editor of The Washington Post and the author of two spy novels, "Agents of Innocence" and "Siro."