Fears of an establishment cover-up of sex abuse allegations involving the former Rochdale MP Sir Cyril Smith are growing after claims a special branch officer tried to prevent detectives interviewing a man who alleged that Smith abused young boys.

Paul Foulston, 65, a former detective constable with Thames Valley police, told the Guardian he was working on a routine murder inquiry in 1976 when two special branch officers intercepted him at a remand centre where he was due to interview a 20-year-old suspect. They ordered him to turn back because they were "working on an inquiry relating to an MP" and the suspect should not be interviewed. After a row in the car park, Foulston and his senior officer ignored the demand and went ahead. After the suspect was eliminated from inquiries, he told the detectives he was angry because he had had a relationship with Smith and had been rejected by him.

He told them in graphic detail how Smith preferred sex with young men and that he would discard them when their physiology inevitably changed.

"It was bloody revolting," said Foulston. "He must have mentioned it to the prison authorities and they must have told special branch. There were plenty of people in authority who knew what was going on. Cyril Smith was knighted and the system must have known he was unworthy. How was that allowed to happen?"

The claims follow allegations from a former special branch officer that a Lancashire police file "thick full of statements from young boys alleging abuse" was seized by M15 in the 1970s and was never forwarded for prosecution. It was claimed this week that the file was labelled by the director of public prosecutions at the time: "No further action. Not in the public interest. DPP." On Friday, as more victims came forward alleging sexual abuse by Smith, the Crown Prosecution Service said it had re-opened its files on Smith and was reviewing their contents.

The office of the Rochdale MP Simon Danczuk said it had been approached by seven men in the past two days.

On Friday Danczuk met a man in his 60s, who requested anonymity, and said he was 17 when Smith came into his room at the Cambridge House hostel in Rochdale when he was ill and told him to strip off so he could examine his glands. Smith reportedly rubbed the young man's thighs before telling him to face away from him and hitting him several times across the buttocks. Alan Neal, a councillor in Rossendale, also said that at the age of 11, in 1964, he was hit by the politician at a hostel for boys. This week Barry Fitton, one of three alleged victims from a Rochdale care home, claimed that the former MP smacked him and stroked his buttocks.

"It can't be right there was a cover-up," said Danczuk. "Smith abused his power beyond belief. How many more people were victims? There are a lot of allegations coming forward now."

On Friday night, Rochdale council was checking Smith's links to Knowl View school, a residential facility for eight- to 16-year-old boys with learning and behavioural difficulties, where he was a governor. Martin Digan, the former head of care, said that in 1994 he went to police with concerns about child safety at the school when Smith was involved.