A magistrate friend of Sir Cyril Smith tried to cover up allegations of sexual abuse against the politician by warning off police investigating the claims, it has emerged.
A report written by a senior detective in 1970 revealed the magistrate made "veiled threats" to officers, telling him he did not feel the issue was "court worthy".
The 14-page report released last night by the Crown Prosecution Service was compiled by a detective superintendent for Lancashire's chief constable William Palfrey during an investigation into allegations that Sir Cyril had sexually abused eight teenage boys in the 1960s by spanking and touching them, six of them at the privately-run Cambridge House children's care home in Rochdale.
The officer, whose name has been concealed in the heavily redacted report, said there was "prima facie" evidence that Sir Cyril was guilty of indecent assault and that the then Liberal prospective parliamentary candidate would have been "at the mercy of any competent counsel" if he were prosecuted.
But he said a magistrate friend of Sir Cyril had warned officers against proceeding with the inquiry.
Three separate files on the issue were later passed to the director of public prosecutions and the Crown Prosecution Service, but on each occasion no prosecution was pursued.
The magistrate, whose name was also redacted, told the detective during an interview: "May I offer a personal opinion. I sincerely hope that this matter is not prosecuted before the court. In my opinion, as a justice of the peace, it is not court worthy.
"The prosecution can do no good at all and the backlash will have unfortunate repercussions for the police force and the town of Rochdale."
He added: "It is no secret that Cyril and I are buddies and not only politically."
The detective, from the Number 5 District Task Force in Oldham, wrote: "Those observations were recorded at the time in Detective Chief Inspector (name redacted)'s official duty diary. The veiled threats and innuendos contained therein reflect (name redacted)'s general attitude to this inquiry."
Sir Cyril was interviewed by the officer in February 1970, but refused to answer questions regarding the allegations against him other than through a pre-prepared statement, in which he stated "most emphatically" that he had not behaved indecently towards the boys.
The report suggests that Sir Cyril had a right to carry out medical examinations on them and to administer corporal punishment, and when handing over his statement the politician produced a copy of an agreement, allegedly signed by the young residents, in which they agreed to allow officers of the hostel to exercise "full parental rights" over them on all matters, including "medical and general discipline".
The detective wrote that Sir Cyril was "most unimpressive during my interview with him", saying: "He had difficulty in articulating and even the stock replies he proffered could only be obtained after repeated promptings from his solicitor.
"Were he ever to be placed in a witness box, he would be at the mercy of any competent counsel."
The officer concluded: "It seems impossible to excuse his conduct. Over a considerable period of time, whilst sheltering beneath a veneer of respectability, he has used his unique position to indulge in a sordid series of indecent episodes with young boys towards whom he had a special responsibility.
"Prima facie, he appears guilty of numerous offences of indecent assault."
In November 2012 Greater Manchester Police said Sir Cyril abused young boys in the 1960s in his role as secretary of the Rochdale Hostel for Boys Association.
After that announcement the force began looking at fresh claims of abuse at Knowl View, a council-run residential school for vulnerable boys where Sir Cyril served as a governor and which closed in the mid-1990s, as well as allegations of a cover-up.
But it was announced last week that inquiries were being halted to allow for a "wider investigation" into the alleged corruption.
In a recently-published book Rochdale's Labour MP Simon Danczuk claimed Sir Cyril raped a number of young boys at a residential school.
Police, spies and politicians helped to hide the historical child abuse carried out by the politician, according to Mr Danczuk's book, Smile For The Camera: The Double Life Of Cyril Smith.
The 29-stone politician was left free to abuse children as young as eight despite 144 complaints by victims, he and co-author Matthew Baker said.
During the 1960s, Sir Cyril - when he was a councillor in the town - acted as a governor for several schools and was active on many council committees involving youth activities.
At least 10 people have so far come forward to say they were abused at Knowl View, of whom seven say they suffered at the hands of Sir Cyril.
Sir Cyril was elected a Liberal MP in 1972 and became a Liberal Democrat on the formation of the new party before leaving Parliament in 1992. He was knighted in 1988 and died in 2010.
Mr Danczuk said the failure to prosecute Sir Cyril at the time was a "missed opportunity" and the documents were another indication of a cover-up.
He said: " This shows that police officers were certain of his guilt," according to the Guardian. "If they had been allowed to do their job they would have saved many more boys from being abused.
"We know that Cyril went on to abuse many more boys at Knowl View residential school, Elm guest house, and other places during the 70s and 80s."