The Centre for Public Inquiry would have been used by its chief executive, Frank Connolly, to undermine the State, despite the best intentions of its US billionaire funder, Minister for Justice Michael McDowell said in the Dáil.
Yesterday the Minister volunteered to take Dáil questions, following opposition fury after it emerged that he gave a copy of a bogus passport application to the Irish Independent last month.
The Minister has repeatedly alleged that the passport, in the name of John Francis Johnson, was used by Mr Connolly to travel to Colombia in April 2001 with convicted IRA bomber Padraig Wilson.
Billionaire Chuck Feeney's foundation, Atlantic Philanthropies, does not intend to change its decision to withdraw €4 million worth of funding to the centre, which is headed by former judge Feargus Flood, The Irish Times understands.
Judge Flood yesterday described the allegations made by Mr McDowell against Mr Connolly as "a drumhead court-martial".
Judge Flood said he stood "four-square" behind Mr Connolly and his right to a presumption of innocence and due process.
The former High Court judge told The Irish Times he hoped to persuade Mr Feeney to reverse his decision to withdraw funding. If he failed to do so, staff would have to be let go at the end of the year.
He also revealed that the board had questioned Mr Connolly earlier this year about allegations that he had travelled to Colombia on a false passport. Having accepted his denials, it wrote to Mr Feeney to express its support for him.
In the Dáil the Minister said he had cleared his decision with Cabinet colleagues before he briefed Mr Feeney about Mr Connolly's background last August, and said he had been briefed by senior gardaí beforehand.
Mr Feeney's donation had been made "with the best of motives" but "equally it is one which, in subversive hands, has the capacity to gravely undermine the authority of the State".
Mr Connolly, he said, had played a central role in the IRA's efforts to earn "tens of millions of dollars" from Farc guerrillas in Colombia from teaching them to make bombs.
Taoiseach Bertie Ahern defended Mr McDowell, although privately some Ministers are uncomfortable, particularly since Atlantic Philanthropies decided to withdraw funding before the Minister made his Dáil accusations.
The Irish Times was unable throughout yesterday to contact Mr Connolly, who has been urged to say where he was in April 2001.