The Government committed over £40 million to a multimedia college despite warnings by officials about the serious financial risk involved, documents released reveal.
It has also emerged that other European countries declined to back the project when it was offered to them by the Massachusetts Institute of Technology (MIT).
The Government was also warned against giving so much money to an overseas institution rather than an Irish college. These concerns were reflected by the former minister for education, Mr Martin.
The documents show several heads of third-level Irish colleges also objected on this basis.
The money for MIT's MediaLab Europe, a high-tech research centre regarded as a pet project of the Taoiseach, was allocated even though officials said the Exchequer could end up funding it indefinitely.
In a memo dated November 1999 and stamped as "seen by the Taoiseach", a senior civil servant, in summarising the case for and against the project, reports: "This [financial] risk is seen as being potentially much greater than £28 million, since there would be an expectation that the State would fund the ongoing operation of MediaLab Europe should corporate sponsorship fail to materialise on the scale projected".
The memorandum, written by the then assistant secretary of Mr Ahern's Department, Mr Dermot McCarthy, is among documents obtained by The Irish Times under the Freedom of Information Act.
Last year the Government agreed to give MediaLab Europe £28 million, plus about £15 million for a premises in the old Guinness Hopstore in the centre of Dublin. President Clinton's visit to the premises last month was seen as an endorsement of the media lab.
The Government plans to make the project the centrepiece of a digital village planned for the Liberties area of Dublin.
Outlining the arguments in favour of MediaLab Europe, Mr McCarthy said MIT was a "world leader" in its area and a number of significant companies would "support a new venture here, and locate content-based facilities in association with it".
The centre subsequently went ahead and opened in July. The memo says the process of negotiation with MIT "has not been a smooth one" and this "has caused some doubts about the commitment of the MediaLab side and their approach to business matters".
Mr Ahern rejected the objections. He brought the proposal to Cabinet late last year and £28 million was allocated towards it. About £15 million was set aside for a building for the facility. The main argument in favour of the project was that no Irish institution could provide the expertise or the international brandname of MIT, at least not in the short term.