Police quiz Israeli premier for second time on money scandal (Roundup)

May 23, 2008, 11:17 GMT

Jerusalem - Israeli police questioned Israeli Prime Minister Ehud Olmert Friday for a second time on suspicions that he illegally received hundreds of thousands of US dollars from a US fundraiser and businessman.

The interrogation at the premier's residence in Jerusalem lasted for about an hour.

Olmert received the money before he became premier in May 2006 from Morris Talansky, a businessman and fundraiser from Long Island, who collected the money from unknown Jewish donors in the US.

A Jerusalem court, rejecting a petition by Olmert's lawyers, also ordered Friday that Talansky, the central witness in the investigation, must begin testifying Tuesday.

Talansky has been in the country since April, but an injunction barring him from leaving was to expire Monday night. He has said he wants to return to the US as soon as possible, although he expressed willingness to return if necessary.

Prosecutors nevertheless feared that he might refuse to return and have therefore pushed for an early testimony in court.

But Olmert's lawyers had raised objections and asked for more time, complaining behind the scenes that an early testimony would paint the premier as a suspect on trial, even before a decision was made on an indictment.

The new affair has already become known as 'the money envelopes' because Olmert allegedly received much of the money in cash - in envelopes.

He apparently received most of it during his term as industry, trade and labour minister from February 2003 to May 2006 in the previous government led by former premier Ariel Sharon.

The affair broke when the premier was first questioned on the new suspicions three weeks ago.

More details were released Wednesday night, after a partial gag order was lifted further.

Olmert is said to have received part of the money from Talansky directly, and part via his former right-hand lawyer Uri Messer and office manager, Shula Zaken, both of whom have also been questioned.

Zaken kept a detailed record of part of the money that she received from Talansky and passed on to Olmert or Messer, which police have obtained.

The entries in her log amount to some 150,000 dollars, Israeli media have reported.

But they have said the total sum, including the part which Olmert received directly, is larger and amounts to hundreds of thousands.

Olmert has not denied receiving money from the US fundraiser, but said all of its was used for four different elections campaigns - when he ran for mayor of Jerusalem in 1993 and 1998 and for the leadership of his former Likud party in 1999 and 2002.

The entries in Zaken's log however date from 2003 to 2005. Olmert has explained this by saying he used the money also to cover debts from the campaigns retroactively.

He has vowed 'there was nothing wrong' with the donations raised for him and that he 'never took a dime,' nor has he taken bribes.

He has nevertheless said that he will resign if an indictment is filed against him.

If one is, charges against him may range from illegal election fundraising, to falsifying corporate documents, fraud, breach of trust, money-laundering - and perhaps also taking bribes.

Law enforcement officials have said they expect a decision on an indictment in several months.

Several previous police investigations against the veteran Israeli politician into alleged corruption - including that he bought his Jerusalem house for well below the market price in return for a suspected quid pro quo - have so far failed to produce indictments.

Olmert's associates have accused 'right-wing' elements of sparking the latest police investigation, in a bid to torpedo the revived peace negotiations with the Palestinians.

His opponents for their part have accused him of announcing a revival of peace talks with Syria this week to divert attention from his political troubles.

The investigation has created more uncertainty for the already troubled peace negotiations between Olmert and Palestinian President Mahmoud Abbas, who have said they want to reach an agreement still this year, before US President George W Bush leaves office.