When Fianna Fáil returned to power with the Progressive Democrats following the 1997 general election, O'Donoghue joined the cabinet as Minister for Justice, Equality and Law Reform.

Following an investigation in 2009 by Ken Foxe, Public Affairs correspondent with the Sunday Tribune, a controversy erupted over the amount and nature of O'Donoghue's spending and expenses.

Sinn Féin raised the spending spree with the Dáil, while a Fine Gael spokesperson branded the expense claims as "indulgent".

[5] Expenses for car-hire services provided by a London-based firm to O'Donoghue during four visits to Britain in 2006 and 2007 came to a total of €21,289.57, according to documents released under the Freedom of Information (FOI) Act.

Documents released to The Irish Times showed that three of the four visits were connected with O'Donoghue's attendance at race meetings in Cheltenham and Ascot.

[6] In 2006, when O'Donoghue visited Manchester on official business during St Patrick's week before attending Cheltenham, car-hire payments made to Terry Gallagher of Cartel Limousines Ltd came to €7,591.96 for "airport pick-ups".

In June 2007, O'Donoghue attended the Royal Ascot race meeting over four days and Gallagher's firm was paid a total of €3,582.22, according to the official receipts.

Fine Gael Environment spokesman Phil Hogan further criticised O'Donoghue's expense claims, labelling them as unjustifiable and inexcusable.

In an interview on the RTÉ News: Six One on 14 September 2009, Róisín Shortall of the Labour Party claimed that O'Donoghue had underestimated the public's anger against what she called his "junketeering".

She questioned the nature of O'Donoghue's statement that failed to address the public, maintaining that it "would be very very" difficult for him to hold his position of Ceann Comhairle.

[10] On 3 October 2009, some hours after the information had been provided to an Irish newspaper under an FOI request, O'Donoghue's expenses record was released by his office.

It was reported that in 2007, Mr O'Donoghue spent two days at the races while his meeting with the French National Assembly only took place while travelling between his hotel and Paris-Charles de Gaulle Airport.

[14] Sinn Féin were the first to call for O'Donoghue to resign, claiming his position was untenable given "a continued waste of public money" since he took the job.

[15] After the Dáil debate, the Fine Gael leader Enda Kenny issued a statement calling on O'Donoghue to "resign forthwith" in the interest of the independence of the office of the Ceann Comhairle.

[18] He stated that his overseas travel spending was not markedly different from other Ministers and he also alleged that Eamon Gilmore's call for his resignation in the Dáil on 6 October 2009 had denied him the right to defend his position.

[18] O´Donoghue subsequently took out a defamation case against the newspaper, Kerry's Eye over articles alleging that the politician had been forced out of office because of his lavish expenses.

In his concession speech, O'Donoghue remarked "I hope that the irony will not be lost upon you that I stand here, on my evening of defeat, in a hall – this magnificent sports complex – which I helped to build".