Mr David Rupert told the Special Criminal Court yesterday that he was approached by veteran Co Donegal republican Mr Joe O'Neill to smuggle explosives into Ireland.
Mr Rupert (51) said that Mr O'Neill helped him lease the Drowse Bar in Co Leitrim in June 1996. He said that the FBI gave him $8,500 to lease the pub.
Mr Rupert said he met Assistant Garda Commissioner, Mr Dermot Jennings, along with the legal attaché to the FBI in Ireland at a hotel in Dublin and again at a hotel near Dublin airport.
He met Mr Jennings, who was then chief superintendent in the crime and security branch, on a number of other occasions.
He said that Mr O'Neill had approached him about a number of beer kegs at the back of the bar and asked him to set aside 10 or 12.
Mr Rupert said that in republican circles hand language was used to refer to bombings or shootings and he said Mr O'Neill's hand language indicated that he wanted the beer kegs for bomb casings.
He took out eight to 10 kegs and copied their serial numbers, then turned the numbers over to Mr Jennings .
Mr Rupert said that in October 1996 he had run out of money and he met Mr Jennings and asked him for money but was told the gardaí don't do that. Mr Jennings offered to pay him mileage but Mr Rupert said: "I just let it ride."
Mr Rupert said he did not understand that he had been turned over by the FBI to the gardaí when he had leased the pub. He said the bar was beside a caravan park which was used mostly by people from Dungannon and Belfast and he would refer to it as "my IRA theme park". Mr Rupert added that in February 1997, he signed a contract with the FBI for $2,500 a month plus expenses to collect intelligence. One clause in the contract specified that he should not carry out criminal acts unless they were "expressly authorised" by the FBI.
When he returned to Ireland in 1997, Mr O'Neill approached him about obtaining Semtex, detonating cord and detonators in the US and told him how to ship them to Ireland. Mr O'Neill suggested putting Semtex inside teddy bears, detonating cord inside jump ropes and detonators inside radios.
Mr Rupert told prosecuting counsel, Mr George Birmingham, that he did not obtain any of these materials. He said that Mr O'Neill gave him an accommodation address to ship the items to in Ballyshannon, a school where his sister worked as a teacher.
Mr Rupert said earlier that he previously worked for the New York State Police as an "undercover person" in the 1970s.