The chief executive of the National Treasury Management Agency has alleged that the agency has been subject of a €3.2m fraud by financial services company State Street.
John Corrigan told the Oireachtas Public Accounts Committee that the NTMA has reported the issue to the Gardaí and the Financial Services Authority in Britain, which regulates State Street.
However, Mr Corrigan told the committee that State Street would argue that what happened was not fraudulent.
State Street is being investigated by the UK's Financial Service Authority following the discovery that it took unauthorised payments for disposing of €4.7 billion of Irish assets.
The company had been employed by the NTMA to help it with a €4.7 billion disposal of assets.
This sale of assets, which had been held by the National Pension Reserve Fund, was to assist with the recapitalisation of the Irish banking sector.
John Corrigan said that State Street was employed as a transition manager by the NTMA to help with the disposal of the assets, as it was a specialist in dealing with large transactions.
Mr Corrigan said State Street was very clearly employed in an agency capacity. He said an agent was someone who was employed for a fee who takes no position in the matter and passes the proceeds of the sale transaction straight back to the client.
Mr Corrigan said that in this case, and "fraudulently in our view" there was 0.07% clipped off the sale price meaning 99.93% found its way back into the national pensions reserve fund. He said that the NPRF was not the only investment fund subject to similar treatment.
''What happened here was fraudulent in nature and it's totally unacceptable," he said. "We have communicated this view very clearly and in unequivocal terms to State Street,'' he told the Committee.
A spokesman for the NTMA confirmed that the alleged fraud is out of State Street in the UK and not from State Street in Dublin's IFSC.
Mr Corrigan said that while €3m funds had been returned to the NTMA, the matter was not over. He said that the money had been accepted without prejudice.
A statement from State Street said that as a result of its own internal analysis, it has determined that ''certain employees failed to comply with the high standards of conduct, communication and transparency'' that it expects.
It added that those individuals are no longer with the company.
''The actions of these former employees and their interaction with a small number of clients do not reflect the high standards of conduct, communications and transparency that State Street expects. We took swift and appropriate disciplinary actions in response to this conduct. As a result this process we have strengthened our transition management business and enhanced our controls,'' the statement added.
Mr Corrigan told today's committee meeting that State Street still has a relationship with the NTMA and has around €900m of funds under management. He said the wider relationship with State Street was something that remained to be settled.
The NTMA boss said the side of the State Street that managed the funds was separate to that engaged in the alleged fraud.
Mr Corrigan also said he had been told by State Street that the clipping of extra money from the sale of the €4.7 billion of assets did not go high up the organisation and those involved had left State Street.
However, he emphasised that the FSA was the authority to determine what had happened in relation to the NPRF asset disposals.
An issue of "overcharging" of NTMA by State Street was raised by the Comptroller and Auditor General two months ago.
Meanwhile, the Finance Minister has said that the chief executive of the NTMA was right to reveal to the public suspicions of something untoward - which in this case - had happened.
Mr Noonan said that it was his job to see that the state was not at a loss, and that everything that was misappropriated has been reclaimed.
He said there was no evidence of a more widespread problem, describing the State Street case as "wholly exceptional and very surprising".
Ireland re-entering borrowing markets
The NTMA chief executive also said it will be more difficult for Ireland to re-enter the borrowing markets fully if Irish investors do not get involved.
John Corrigan said Irish investors were not natural holders of Irish debt during the boom and sold out as the crisis hit.
He said it was in the country's interest to see as deep a pool of investors as we can, and the more diversified the better.
He said the agency was planning its first issuance of Inflation Linked Irish Government Bonds and along with another debt instrument, Amortising Bonds, he would hope to issue €3-5 billion over the medium investment term.
A new agency to control legal costs is being established within the NTMA. The backdrop to this is the Mahon and Moriarty Tribunals and recruitment is underway.
He also said that 227 of the agency's 500 staff are assigned to NAMA.