He walked into the Dallas office of the FBI late on a Friday afternoon in 1980. Frank Varelli said he had information about some killings in his native El Salvador. He listed dates and places. He named names.
"We contacted the CIA, and they verified the killings were committed," recalled Gary Penrith, then acting head of the FBI office. "So this guy looked like he might be giving us reliable information."
With the FBI's blessing, Varelli infiltrated the Dallas branch of a group he said was behind the killings - the Committee in Solidarity with the People of El Salvador, which opposed U.S. policy in Central America. Varelli reported, among other things, that members of the group were plotting to assassinate President Ronald Reagan. The FBI launched a major investigation.
Years passed. Penrith went on to Washington to become one of the bureau's highest-ranking intelligence officials. Then he got the news: Varelli had concocted his allegations. The investigation had been a costly waste of time.
"He was a wacko," said Penrith, one of six FBI officials disciplined for the embarrassment. Instead of a hoped-for promotion to assistant director, he finished his 24-year career running the FBI office in Newark, N.J.
"I'm not crying the blues," he said. "I'm just telling you what happens when an informant goes bad."
Whether investigating a terrorism conspiracy or trying to bust a burglary ring, authorities depend on insiders willing to share information. Yet dealing with informants is a treacherous business.
In April, authorities in Los Angeles arrested a Chinese-American informant and alleged that she had carried on affairs with two FBI counterintelligence agents who supervised her activities. The informant, Katrina Leung, allegedly passed classified information to the Chinese government. She has denied any wrongdoing.
Last fall, John J. Connolly Jr., a former FBI agent in Boston, was sentenced to 10 years in prison for protecting the sort of gangsters he was supposed to put behind bars. Officials say Connolly became so close to his informants that he looked the other way while they committed extortion, ran bookmaking operations and killed rivals.
"You hold on to a source the way you hold on to a snake," said Steve Moore, an agent in Los Angeles. "Very carefully and very firmly. And the problem is knowing how to let go of them."
The nature of the relationship between agents and sources creates powerful temptations. They share secrets, including the secret of their relationship. They spend lots of time together, often in private. Each wants something, and each works hard to build the other's trust - and wear down the other's defenses.
"You have to figure out why they're talking to you," said Rick Smith, a retired counterintelligence agent from San Francisco. "Because ultimately in counterintelligence, when you get someone to be a mole, they are betraying their country. And you need to know why."
In many cases, money is the motivation.
Smith recalled a European businessman the FBI recruited in the early 1980s to help foil espionage efforts by Soviet and Eastern European agents. In one case, foreign agents asked the man to help them buy sophisticated computer equipment from the United States.
"We found out about it," Smith said. "And we were able to alter the equipment and send them things that didn't work."
Afterward, the businessman felt he was worth more than ever to the FBI. He demanded $2 million and threatened to quit if he didn't get it.
"So, I let him go," Smith said. "You can't be extorted."
Handling informants requires a deft balance. Agents must get close to sources without letting down their guard.
"You have to keep in mind it is a business relationship," said Bill Gore, a former assistant director of the FBI's inspection division. "The stakes are extremely high, and if you have a valuable asset, it is hard not to go beyond an arm's-length relationship."
Connolly, the disgraced former agent, grew up in a South Boston housing project and bragged that his credentials as a "hometown boy" gave him special access to the New England underworld. In 1975, he recruited mob boss James "Whitey" Bulger, a childhood friend, as an informant. The relationship lasted nearly 20 years and was corrupt to the core. Connolly protected Bulger, tipping him to investigations into his activities and even identifying disloyal members of his gang. Bulger reciprocated with information about mob competitors.
Connolly became a star in the FBI, and Bulger and his associates enjoyed a kind of immunity as they ran drugs, continued gambling operations and did away with rivals.
Four years after retiring from the bureau, Connolly tipped Bulger in 1994 that he was about to be indicted on extortion, murder and racketeering charges. Bulger disappeared and remains on the FBI's 10 Most Wanted list.
Agents say such misconduct is rare, and that FBI regulations, peer pressure and rigorous monitoring usually prevent agent-source relationships from becoming too intimate.
Each FBI field office must review the files of all informants every 90 days. Every 18 months, field offices conduct internal inspections that include a look at informants. Every three years, each FBI office is subjected to an inspection by agents from headquarters, who review the files of every criminal informant and intelligence asset.
For all the potential pitfalls, current and former agents say, there is no exaggerating the importance of reliable informants. Many note the case of Raymond J. Takiff, a Miami defense attorney who played a key role in an FBI corruption probe called Operation Court Broom.
Takiff approached authorities in August 1989 and claimed that Roy Gelber, a judge on Florida's highest trial court, was corrupt.
"He offered immediately to wear a wire," said retired FBI agent Tom Becker. "He was crucial, critical to the case."
Takiff recorded about 500 conversations with the judge and other principals that showed Gelber could be paid to fix cases. The judge pleaded guilty to racketeering and agreed to cooperate. Nearly a dozen Dade County judges and defense lawyers ultimately were convicted.
Takiff, who died five years ago, never shared with Becker his reasons for helping the FBI.
"My guess," Becker said, "was that he wanted to do something good."
Greg Krikorian writes for the Los Angeles Times, a Tribune Publishing newspaper.