The Taoiseach, Mr Ahern, said his programme manager and a journalist had acted "in good faith" relating to a newspaper article about a financial contribution made to Fianna Fail.

Mr Ahern was replying to Opposition questions about the involvement of his programme manager, Mr Gerard Hickey, in an article by Ms Geraldine Kennedy in The Irish Times, which revealed that Mr Brian O'Carroll, a Fianna Fail supporter, arranged for a passport investor, Mr Gerry Lindzon, to make an interest-free loan to a party account in the names of Mr Albert Reynolds and Mr Ahern in 1993.

The Labour leader, Mr Ruairi Quinn, said he understood the word "diverted" was used by Mr Hickey in a telephone conversation with a particular journalist regarding the controversy that arose relating to the passports-for-sale scheme and the role played by Mr Lindzon and Mr O'Carroll.

He asked if the word had been used with the Taoiseach's authority, or if Mr Hickey had spoken prior to consulting the Taoiseach on the matter.

Mr Ahern said discussions had taken place between his programme manager and the journalist in question. "They acted in good faith. Nobody tried to mislead anybody else. "I do not know what words were used. Some of the discussions took place before I had knowledge about the issue.

"As I said in the House, what I was objecting to was that money, like IDA money, would have been used by the party that I lead."

Mr Quinn said: "In extensive questions and answers in the House, the Taoiseach described the newspaper story which derived from the conversation in which the word `diverted' was used as a load of lies and a ball of smoke.

"Subsequent clarification in relation to the events shows that the story was not, in fact, a load of lies and far from being a ball of smoke. "Does the Taoiseach now think that the programme manager perhaps inadvertently misled the journalist in using the word `divert' when, in fact, the substance of the published story has been substantiated?"

Mr Ahern replied: "I do not want to rerun it, but I do not think the story was substantiated . . ."

Pressed further, Mr Ahern said he had no wish to continue with the issue.

Mr Pat Rabbitte (Labour, Dublin South West) asked if it was not the case that the reference to IDA funds did not appear in the article. It was actually a verbal comment on radio. He asked why the Taoiseach was still saying that the article was not substantiated.

"Funds were transferred from the investment account of the person who was the beneficiary of the passport to a Fianna Fail account in the Taoiseach's name and that of the former Taoiseach for Fianna Fail purposes? Is that not the fact of the matter? How is that story then not substantiated?"

Mr Ahern said: "The way something is put in the cool light of day and the way it is put on another occasion, as Deputy Rabbitte would appreciate, are often two very different things. How the story was put on that particular day was very much as if money, like IDA money, was diverted into a Fianna Fail account.

"What happened was that a member of our national executive, trying to assist the party, had gone around looking for donations and a person had given a donation to the party which was transferred into the Fianna Fail account."

Pressed further by Mr Rabbitte, the Taoiseach said that the money was a donation. "Perhaps if I had known that this person even had made an application, I would have had a row about it but, as it happened, it still is a loan in the department's records."

Earlier, the Fine Gael spokesman on foreign affairs, Mr Gay Mitchell, said a reputable journalist had written an article based on advice she had received from a named adviser to Mr Ahern. The Taoiseach had subsequently come into the House and described the report as lies and a ball of smoke.

"Would he agree that if there was any ball of smoke or misrepresentation, it was based on fact as the journalist understood it and as advised by the Taoiseach's spokesperson? Will the Taoiseach take the opportunity to apologise to the House, to the journalist and to the newspaper concerned for his statement?"