In 2368, he entered into a covert alliance with the Cardassians to eliminate a Bajoran terrorist cell, motivated by the fear of losing the alliance or by the threat to several Federation colonies. He was visited by the Cardassian liaison to the Federation and informed that a Bajoran terrorist, Orta, was responsible for the recent attack on the Federation colony of Solarion IV. The Cardassians proposed an agreement whereby Kennelly would provide pretense allowing the Cardassians to destroy Orta and his cell, an arrangement to which Kennelly agreed. In actuality, this was a ruse, as the Cardassians staged the attack on Solarion IV and fabricated evidence.
In furtherance of this goal, Kennelly arranged to have Ro Laren, a disgraced Bajoran Starfleet ensign, to act as his agent on the mission. Kennelly directed Ro to secretly offer weapons and supplies to Orta in exchange for halting attacks on Federation targets. He brought Ro with him to Lya Station Alpha to rendezvous with the USS Enterprise, who had picked up survivors from Solarion IV. He ordered Captain Jean-Luc Picard to offer amnesty to Orta in exchange for halting his terrorist activities, and to bring on Ro for the mission.
However, when Ro learned that Orta was not responsible for the attack on Solarian IV, she decided to confide in Captain Picard, who was able to deduce that the Cardassians had been manipulating Kennelly. Picard subsequently manufactured a scenario in which the Enterprise would escort Orta's vessel back to its home base, in an attempt to lure out the Cardassians. Picard's plan worked, manipulating the Cardassians into leaving their own territory to destroy Orta's ship. It was at this point that Picard informed Kennelly that Orta's vessel had not actually been occupied, and was being remotely-controlled from the surface, and confronted Kennelly with the fact that he had discovered Kennelly's role in the conspiracy.