CIA to Issue Guidelines on Hiring Foreign Operatives : Intelligence: It’s the agency’s first attempt to develop oversight procedures. Director says dealing with unsavory characters is necessary evil.

In the face of mounting criticism over U.S. intelligence ties to Third World military officials accused of human rights abuses, CIA Director John M. Deutch said Monday that his agency is preparing its first guidelines for recruiting foreign agents and paid informants.

The pending directive is the intelligence agency’s first attempt to develop quality control over the foreign nationals on its payroll, Deutch said in an interview with reporters and editors in The Times Washington Bureau.

The guidelines, now being developed by Jeffrey H. Smith, the agency’s new general counsel, are expected to force CIA case officers to become more selective in their recruiting. CIA headquarters now will have standards for determining the value of informants before deciding whether CIA case officers should recruit them--and whether they should be paid.

Still, Deutch cautioned, the CIA will have to continue to deal with unsavory characters if it is to remain an effective intelligence service.

“We are going to be issuing a clearly written guidance on the circumstances when we will deal with a particular individual and also when we will pay that individual for services rendered,” Deutch said.

“But let me tell you, you are not going to be able to do the clandestine collection of intelligence with all wonderful and nice people,” he added. “So you are going to have to balance here the character of the individual with respect to the intelligence you are gathering. And I don’t know that there has been an understood [agency] policy on that in the past.”

Deutch, who was confirmed as CIA director in May, is planning to issue the new guidelines as one of his first steps in overhauling the CIA’s troubled directorate of operations, the agency’s covert operations arm.

Traditionally, CIA officers operating under cover overseas have been given broad discretion in what is clearly one of the most difficult and hazardous tasks in the agency: recruiting foreign officials and convincing them to betray their countries and become paid agents of the United States.

What’s more, employee evaluations and promotions for case officers traditionally have been based on how many paid informants officers have either recruited or managed, creating incentives for CIA officers in the field to recruit as many sources as possible, regardless of whether good information has resulted, CIA officials have acknowledged.

But recent revelations that a Guatemalan Army officer working for the CIA had been tied to the murders of an American innkeeper in rural Guatemala and the torture-killing of the Guatemalan husband of another American citizen have forced the agency, under congressional pressure, to review its procedures for so-called “human intelligence.”

The Guatemala case is now the subject of six separate investigations in the executive branch and Congress, and the CIA’s inspector general is scheduled to release a detailed report in July.

The case has prompted both Republican and Democratic members of the Senate Intelligence Committee to publicly question whether the CIA needs large networks of paid agents in underdeveloped countries now that the Soviet threat in the Third World has disappeared.

Deutch said he believes that it may be time for the CIA to expand its covert operations programs. He said that there has been a steady decline in covert operations since the early and mid-1980s--mainly because of the end of large-scale operations, such as the CIA funding of rebels in Afghanistan and Nicaragua. He said: “I think there is an argument to be made for strengthening our covert action capabilities.”

Deutch, who said during his confirmation hearings that he had never seen an organization that was more demoralized, warned that efforts to boost sagging morale and end hidebound management practices--in the CIA generally and the directorate of operations specifically--could take years.

Times staff writer Ralph Vartabedian contributed to this story.