A key member of the Prince George's County police so-called "death squad" flatly denied in federal court today that he instructed police informants to recruit participants for a series of staged robberies in 1967 in which waiting police shot and killed two suspects.

"Absolutely not," said Blair Montgomery, commander of detectives in the police department's Hyattsville bureau at the time, who retired with the rank of major. He was testifying in response to questioning by attorney Barnet D. Skolnik, one of several lawyers for plaintiffs in a $9 million civil rights lawsuit against police.

Montgomery, known as a strict, by-the-book commander, told a six-member civil jury he always consulted with the county prosecutor's office in advance about police stakeouts that involved "informant-participants," and "I don't recall being advised" that any of the 1967 stakeouts were illegal.

Survivors of the two slain men, plus two other men arrested in the incidents, have accused Montgomery and two other officers of setting up convenience store robberies by having informants lure unwitting participants to the scene and then shooting or arresting them, in violation of their 14th Amendment right to due process.

Police have denied the allegations, contending that the informants came to them with information about planned robberies and detectives then staked out the targeted stores in a routine and proper manner.

They say the two slain suspects was fired on by waiting police only after one ignored orders to halt and fired at officers and the other pointed his pistol at police as he attempted to flee.

Two weeks ago, another alleged "death squad" member, Capt. James Fitzpatrick, also denied instructing informants to recruit robbery participants. Still another alleged member, Joseph D. Vasco Jr., now the second highest ranking official in the county police department, has not yet testified, although he has made general denials in court papers.

All three police defendants are expected to testify more fully after the plaintiffs rest their case next week. Montgomery testified briefly today and Fitizpatrick two weeks ago only in reference to the police department's relationship with the county prosecutor's office, saying they periodically sought legal advice on the propriety of stakeouts, arrests, interrogations and other police procedures.

Their testimony is crucial because the plaintiffs contend State's Attorney Arthur A. Marshall, the county's chief prosecutor, and former Assistant State's Attorney Benjamin Wolman authorized or acquiesced in the "death squad" stakeouts.

Today, Marshall testified that police did ask his office for advice, and that he knew of no case in which police proposed a stakeout or other action that his office determined was illegal.