In a last-minute proposal to settle a dispute over spying on terror suspects, city officials said in federal court yesterday that the police would promise to adopt new guidelines to protect civil liberties if the court lifted a 20-year-old order that limits police surveillance and undercover operations. But, in final arguments before Judge Charles S. Haight Jr. of United States District Court in Manhattan, civil liberties lawyers rejected the offer, calling it an empty gesture. “What they say they will do is entitled to no consideration in this matter,” Jethro M. Eisenstein, one of the lawyers, told the judge. The arguments came on a motion by the city to do away with most of the provisions of a consent decree that ended a 1971 suit over harassment of political advocacy groups by the Police Department’s “red squad,” as it was then known. The judge gave no timetable for his decision. Full Story