On Tuesday, a report by Northern Ireland Police Ombudsman Al Hutchinson revealed that the RUC investigation into Father James Chesney was "compromised" after senior officers conspired with the Government and Church to protect him.
Senior RUC officers had sought the Government's assistance through talks with senior members of the Catholic Church, the report explains.
Detectives believed Fr Chesney was the IRA's director of operations in south Derry and was the chief suspect in the Claudy atrocity and other terrorist incidents, but they never questioned him.
Mr Hutchinson also revealed that the police had intelligence suggesting that Fr Chesney continued to be involved in the IRA after the Claudy bombing.
Nine people were killed and 30 were injured in the Co Londonderry village when three car bombs exploded in quick succession on 31 July 1972.
"For my part, on behalf of the Government, I am profoundly sorry that Father Chesney was not properly investigated for his suspected involvement in this hideous crime, and that the victims and their families have been denied justice, " NI Secretary Owen Paterson said.
"My anger at the actions of those responsible for the attack is matched in strength by my sorrow that the survivors of the atrocity and the relatives of the dead did not see those responsible brought to justice for their crimes.
"I recognise, of course, that all those involved in combating terrorism at the time were making decisions in exceptionally difficult circumstances and under extreme pressure," Mr Paterson added.
At the time, senior politicians feared the arrest of a priest in connection with the atrocity could destabilise the security situation even further.
The 1972 Claudy bombing occurred six months after Bloody Sunday on the bloodiest month of the bloodiest year of the Troubles.
"Police Ombudsman investigators spoke to a former Special Branch detective who said that he had wanted to arrest Father Chesney in the months after the bombing," the report explains.
"But that this had been refused by the Assistant Chief Constable (ACC) Special Branch, who had advised that 'matters are in hand.'"
Then-Secretary of State William Whitelaw and the head of the Catholic Church in Ireland, Cardinal William Conway, met to discuss the case after being approached by a senior RUC officer who asked what action could be taken "to render harmless a dangerous priest".
Following the meeting, Fr Chesney was transferred in 1973 to a parish in Co Donegal outside the Northern Ireland jurisdiction, where he died in 1980.
Mr Hutchinson's officers examined diaries belonging to Cardinal Conway which confirmed contact with him and Mr Whitelaw over the cleric and correspondence between the RUC, which was led by chief constable Sir Graham Shillington, and the government.
"In the absence of explanation the actions of the senior RUC officers, in seeking and accepting the Government's assistance in dealing with the problem of Father Chesney's alleged wrong doing, was by definition a collusive act," said Mr Hutchinson.
"The consequence of their acquiescence was that the investigation was further compromised. The decision failed those who were murdered, injured and bereaved in the bombing. The police officers who were working on the investigation were also undermined," he added.
No-one has ever been charged with the Claudy murders, which happened hours after British troops stormed republican no-go areas in Derry as part of Operation Motorman.
Mr Whitelaw, a minister in Edward Heath's Conservative government, died in 1999, Cardinal Conway in 1977 and Sir Graham in 2001.
"The key police decision makers referred to in this Statement are deceased. Had they been alive today their actions would have demanded explanation which would have been the subject of further investigation," Mr Hutchinson said.
In a statement, the PSNI said the investigation into the 1972 attack was now "under the remit of the Historical Enquiries Team".
"We recognise that opportunities to arrest and interview all of the suspects were not taken in 1972. It is the duty of police to investigate fully and we accept that more could and should have been done at the time", the PSNI statement said.
Police Ombudsman's Findings:
- Detectives believed Father Chesney was the IRA's director of operations in south Derry and was a prime suspect in the Claudy attack and other terrorist incidents.
- A detective's request to arrest the cleric was refused by an assistant chief constable of RUC Special Branch who instead said "matters are in hand".
- The same senior officer wrote to the government about what action could be taken to "render harmless a dangerous priest" and asked if the matter could be raised with the Church's hierarchy.
- In December 1972 Mr Whitelaw met Cardinal Conway to discuss the issue. According to a Northern Ireland Office official, "the cardinal said he knew the priest was a very bad man and would see what could be done". The church leader mentioned "the possibility of transferring him to Donegal..."
- In response to this memo, RUC chief constable Sir Graham noted: "I would prefer a transfer to Tipperary."
- An entry in Cardinal Conway's diary on 5 December 1972 confirmed a meeting with Mr Whitelaw took place and stated there had been "a rather disturbing tete-a-tete at the end about C".
- In another diary entry two months later, the cardinal noted that he had discussed the issue with Father Chesney's superior and that "the superior however had given him orders to stay where he was on sick leave until further notice".
Reactions:
DUP East Londonderry MP Gregory Campbell: "The nine families who lost loved ones in this terrorist atrocity, as well as the survivors, have not had a fraction of the investigative resources compared to the resources deployed to investigate Bloody Sunday. These families have been treated as second class victims."
Sinn Féin's Francie Molloy: "The deaths in Claudy were wrong and should not have happened. The families of the those who died or were injured there deserve and are entitled to the truth about the deaths of their loved ones. They have the same right to know as the families of those killed in Ballymurphy, Springhill and the New Lodge. Sinn Féin support them in this".
SDLP Foyle MP Mark Durkan: "The report by the Police Ombudsman into the bombs in Claudy in 1972 is extremely damning." "The travesty that happened then in relation to the investigation clearly is deemed by the Police Ombudsman to be an act of collusion." "No-one in Special Branch should have gone for a different course. The Secretary of State should not have gone for a different course. And a Church leader in talking to state authorities should have been saying to people 'do your duty'."
UUP leader Reg Empey: "The findings of the Ombudsman's report makes for depressing reading. It is clear that certain actions of the RUC and the Secretary of State were wrong and should not have happened." "The statement made by Cardinal Brady is, unfortunately, entirely inadequate. In particular, the absence of an apology to the victims of Claudy falls very far short of what should be expected of church leaders in the exercise of their position of moral authority."
Alliance Party Justice Spokesperson Stephen Farry MLA: "This is a most troubling report which sheds light not just on one of the worst atrocities of the troubles but also more directly on how the incident was handled by the authorities and by the Catholic Church." "While society has moved on dramatically and with in particular a new spirit of accountability, there are issues for the Government and the Church to respond to and to address."