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The Hidden Lords don’t have any official way of screening new candidates to join their ranks, but unofficially Khelben and Laeral mindscry everyone, FAR more subtly than the War Wizards go about it (Laeral in particular takes pride in the person being examined having no inkling that she’s done any probing). Nor does this thought reading end when someone is accepted as a Lord; Khelben was suspicious enough to eavesdrop on the Lords fairly often - - though he and Laeral had several arguments about this; she didn’t mind him prying and knowing, but she wanted him to keep back and “Let the Lords be lords and do their own ruling, fall into their own corruption, and make their own mistakes. You can’t be ‘fixing’ everyone’s deeds and making up their minds for them in everything, Blackstaff mine!”
Most of the Lords have no idea that Khelben and Laeral do this (rumors in plenty abound in the city all the time about the Lords being the puppets of Khelben or this noble lord or that crime boss, but even the Lords have no hard evidence of their thoughts being monitored often). A few suspect it darkly (and firmly), and Piergeiron “knows” he can call on Khelben to probe someone he himself is very unsure of - - but he believes Khelben does this only reluctantly (because Laeral has badgered Khelben into acting reluctant), when the Open Lord insists on it.
Piergeiron has his own trusted mages he more often uses to pry into the affairs of Lords (though he does so with true reluctance, and as rarely as possible), and certain secret agreements with the Watchful Order (e.g. “If a Lord is murdered, and I confirm to you that the victim was a Lord, you will covertly use spells to spy on, and try to read the thoughts of, certain persons I will then name to you, and report all results back to me in confidence, or in the event of my death will report to the Lord or Lady Mage of Waterdeep”) to cast spells in the event of certain occurrences.

And, yes, if the Lords believe a person truly has the best interests of the City at heart, they would indeed offer a Lordship to someone they knew was evil. Of course, that person would be constantly spied upon, magically and otherwise, by the means I’ve already described and by others (hired guilds and private adventurers who would not be told the person was a Lord, but who would be asked to look for evidence of specific meetings, activities, etc.), from the moment they “took the mask.” Randulaith would of course be one such, if chosen, and Elaith would be another.

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