
He was the one who orchestrated Dr. Marv's kidnapping, and eventual death. Snake learned the truth from Holly, and confronted him. He attacked Snake, but was easily defeated.
A bit later, apparantly out of guilt for his actions after Snake retrieved the MSX cartridge, Dr. Madnar told him how to destroy the Metal Gear D. However, Snake fell down a trap door (which was hinted to have been activated by Gray Fox on his own accord, due to his mocking Dr. Madnar's claim that it had a weakness in it's leg joints).