Olmert's aides dismiss as 'speculation' reports of probe

Jan 10, 2007, 17:14 GMT

Tel Aviv - Aides to Israeli Prime Minister Ehud Olmert dismissed as 'speculation' Wednesday reports that the premier will face a criminal investigation over his alleged role in the sale of one of Israel's largest banks while serving as finance minister.

'We have not received any official statement from an authoritative source on this issue,' Israel Army Radio quoted the aides as saying.

They said Olmert, currently on an official visit to China, had met with Attorney-General Menahem Mazuz before leaving for Beijing on Monday and had not received any indication that an investigation was in the offing.

The Justice Ministry said in a statement only that it would 'not respond' to any news item, report, or speculation about 'the affairs linked to the prime minister.

According to the reports, aired Tuesday night on Israel's Channel 10 television news, the investigation will focus on whether Olmert intervened in the tender for the privatization of Bank Leumi on behalf of two personal friends who were also business associates.

Olmert is also under a cloud over two other allegations. One is that he purchased a house in Jerusalem's upscale German Colony neighbourhood for hundreds of thousands of dollars below the market price, in return for promising to use his influence as mayor on behalf of the contractor.

The second allegation is that while serving as Minister of Trade and Industry, he made politically-motivated appointments at ministry's Small Business Authority.

The Channel 10 report Tuesday night is the latest corruption allegation to hit the Israeli headlines.

Police revealed last week that they are investigating fraud in the Israel Tax Authority and Olmert's bureau chief Shula Zaken is a prime suspect in the case, in which she, the head of the Tax Authority and other senior officials are suspected of giving tax breaks to leading businessmen and making appointments within the institution in return for bribes.

President Moshe Katsav is currently being investigated on a host of sexual harassment charges, and former Justice Minister Haim Ramon stepped down to face trial for the same allegations.

Tzahi Hanegbi, a senior legislator in Olmert's Kadima party, is accused of making illegal political appointments when internal security minister, and Omri Sharon, son of former premier Ariel Shaorn, was sentenced in February to nine months in prison for illegal fundraising for his father and setting up fake companies to do so.

Olmert was elected prime minister in March last year, but since taking office the veteran politician has seen his popularity plummet.

Some of his constituents, frustrated at the recurring whiff of corruption and at the inconclusive result of Israel's summer war with Lebanese Hezbollah guerillas, are openly calling on him to quit.

In addition, Olmert's relationship with Defence Minister Amir Peretz, leader of his largest coalition partner, the Labour Party, are said to be at a nadir and the premier was forced last week to deny a report that he planned to fire Peretz.

For his part Peretz, a former trade union head, who unlike many former Israeli defence ministers did not begin his post after an an advanced military career, has himself come under heavy fire for his lack of expertise in defence issues.

A poll of Labour party members published Monday showed only 4 per cent wanted him to continue in the defence ministry, and he faces a concerted challenge ahead of the party's leadership contest scheduled for May.

The poll published Monday showed him trailing in fourth place, with 12 per cent support, behind former prime minister Ehud Barak, (30 per cent), first-term legislator Ami Ayalon (23 per cent) and backbencher Ophir Pines (18 per cent).