Iarnrod Eireann directors claimed they were misled about cost overruns on a signalling programme linked to an Esat network on the railway.
A projected rise to £50 million (#63 million) from £14 million in the cost of the signalling initiative prompted the establishment of an Oireachtas inquiry, which will hear evidence in September.
CIE board papers from 2000 seen by The Irish Times indicate that directors of its rail company expressed "major concern" that they learned of the overruns only after the Department of Public Enterprise.
The Iarnrod Eireann and CIE boards are separate entities, although there is some overlap of membership.
Two reports last year by PricewaterhouseCoopers identified the projected cost overruns on contracts with the Dublin firm Modern Networks Ltd (MNL) and the Italian company Sasib.
In a presentation to the CIE board on June 7th, 2000, its then group chief executive, the late Mr Michael McDonnell, said directors in Iarnrod Eireann "were never informed" of alleged concerns within the company's engineering division about the suitability of its contractors.
Citing an Iarnrod Eireann board meeting on May 30th, 1999, Mr McDonnell said: "The board were very concerned that they had been misled and kept in the dark about problems which had become evident in this project."
Mr McDonnell said the rail board was "not aware" that the original specification of the project was at "too high a level".
He added: "It was standard procedure for contractors to lob in excessive claims for additional costs where contracts were not very tightly drawn and the Iarnrod Eireann executives regarded the Sasib/MNL claim [for higher fees] as being lodged in this spirit."
The inquiry by a sub-committee of the Oireachtas Joint Committee on Public Enterprise and Transport wants to find out how costs escalated. It has "particular concern" about the departure of four senior Iarnrod Eireann figures to work at high levels in MNL.
In a statement last week, the sub-committee's chairman Mr Sean Doherty said the Esat project was linked from its inception with Iarnrod Eireann's plan to upgrade signalling on the railway.
Mr Doherty said a "significant proportion" of the company's valuation was attributable to the telecom network on the railway when it was floated in 1997. He noted that the CIE deal with Esat was not subjected to the transport group's procurement policy.
Because the Esat system was ploughed into the railway, the signalling had to laid by hand, raising costs.
Mr McDonnell took early retirement last February. He died in April.
