Bertie Ahern's first cabinet agreed to an unorthodox indemnity deal to protect a tax-evading Fianna Fáil TD from having to pay potentially tens of thousands of pounds in libel damages over a newspaper article he had written.

A prominent businessman had threatened to sue former Fianna Fáil deputy Denis Foley over a piece he had written while serving as chairman of the Public Accounts Committee.

Then finance minister Charlie McCreevy urged the government to foot the bill in the event that the legal action was continued against Mr Foley.

Two years after that, Foley was forced to resign his seat when it emerged at the Moriarty tribunal that he had held a controversial Ansbacher account. Foley had known about his offshore accounts since the 1980s and had tens of thousands of pounds deposited there to avoid tax.

Then Taoiseach Bertie Ahern admitted he had known in advance that the Moriarty tribunal was looking at Foley's finances but would not say since when.

In July 1998, McCreevy brought forward an "aide memoire" to cabinet seeking protection for Foley.

A record of the meeting, which has been obtained by the Sunday Tribune, said: "Following consideration of an aide memoire dated 22 June 1998 submitted by the Minister for Finance [Charlie McCreevy], agreement was given, in principle, to the provision of an indemnification for Deputy Denis Foley

"[It is] in relation to matters outlined in the aide memoir, on the basis of consultations by officials of the Department of Finance with the Attorney General's Office with a view to devising an appropriate procedure to indemnify Deputy Foley in this instance, while guarding against the creation of a precedent with wider effect."

The Department of Finance said the indemnification deal had been put in place because of the defamation action that had been taken against the TD.

It said: "On 1 July 1998 the government agreed, in principle, to the provision of indemnification for Deputy Denis Foley in relation to the legal costs of a defamation action brought against him by Mr John McCarthy of Emerald Meats Ltd.

"This arose from an article published in the Irish Times on 23 August 1995 by Deputy Foley who was then chairman of the Public Accounts Committee.

"This indemnification bore no relation to tax matters concerning Deputy Foley, which only became public knowledge at a later date."

In September 1999, Foley had been serving as chairman of the Public Accounts Committee when he had been involved in questioning Ansbacher officials.

A year later, the Kerry politician, by now an independent, became the first TD ever punished for breaching the Ethics in Public Office Act, when he was suspended for 14 days.