The Taoiseach's support for a Co Kerry marina created "unwarranted expectations", and left the State open to future claims, a top Department of the Marine official warned in 2000.
Kerry County Council forced the developer of the Kenmare marina at Dereenacallaha, Mr Danny McCarthy, to knock down part of the building before Christmas because it breached planning laws.
In December 2000, Mr Ahern encouraged the then Minister for the Marine, Mr Frank Fahey, to support the project even though its merits had been subject only to "initial evaluation".
In an unusual action, Department of Marine assistant secretary, Mr Michael Guilfoyle formally recorded his reservations in an official note on December 7th, 2000.
In the Dáil yesterday, the Taoiseach strongly defended his support for the project, which has already received €333,000 of State aid, though €400,000 remains still to be paid.
The first grant instalment, said Mr Ahern, was paid over in December 2001, once evidence that planning permission and foreshore licences had been secured.
Kenmare has been involved in tourism for 110 years, he told Fine Gael leader, Mr Enda Kenny.
"I am glad to see we are trying to do something for tourism in Kenmare."
In December 2000, the Taoiseach's special adviser, Mr Gerry Hickey, drafted a letter expressing support for the development of the marine store, a canoe and sail training centre and other facilities.
In a handwritten note for the Taoiseach, Mr Hickey said: "This is the letter you need for the Kenmare marina project. Would you please see if Minister Fahy (sic) will sign it and issue it?"
The letter's final paragraph read: "Subject to the satisfactory responses to the additional information sought, I believe that the project will be grant-aided and will go ahead subject to the balance of funding being available."
The letter was cleared by the Taoiseach and sent on to Mr Fahey's office, where the text of the final paragraph was strengthened following further lobbying by Kerry South TD Mr Jackie Healy-Rae.
Following Mr Healy-Rae's intervention, it was changed to read that the Minister "agreed" that the project would be grant-aided - even though some questions remained unanswered.
In his official note on the file, Mr Guilfoyle said the private secretary to the Minister for the Marine had told him that the Taoiseach "was anxious that such a letter issue without delay".
He went on: "I advised that the letter constituted a 'letter of comfort' which could be interpreted as creating unwarranted expectations and a possible basis for a future claim against the Department."
The tone of the letter was "adapted", he said, following a consultation between the Minister, the Minister's private secretary and Mr Healy-Rae, whose son Danny did some work on the project.
"I reiterated my advice as above, indicating that the changes made increased further the likelihood that the letter would be cited as an irreversible commitment to funding in advance of consideration," he wrote.
Describing the Kenmare project as "Punchestown-by-the-Sea", Mr Kenny said it had been cleared for support without proper checks being made.
The Fine Gael leader said he supported tourism development "but such projects must always be comprehensively evaluated" to ensure that taxpayers get value for money.
"It is the creation of a slush fund for political patronage by him and on his direction and it is an insult to the people of the country," Mr Kenny declared in the Dáil.
