Calls for Prime Minister Ehud Olmert's resignation mounted on Friday as police probed allegations that he accepted hundreds of thousands of campaign dollars in cash-stuffed envelopes from a U.S. citizen.
The investigation into Olmert's fiscal conduct is the fifth in two years and threatens to force him from office and derail troubled peace talks with the Palestinians.
After a week-old gag order on the case was partially lifted Thursday, police disclosed that they suspect Olmert of illicitly collecting cash for campaigns over at least six years, when he was mayor of Jerusalem and minister of trade in former Prime Minister Ariel Sharon's government.
American Jewish businessman Morris "Moshe" Talansky is suspected of involvement in passing money to Olmert directly or through his associates, police say.
Investigators are examining where the illegal contributions went, although it appears the money "disappeared" in the direction of his political party at the time, Likud, a police official said Friday. He spoke on condition of anonymity because the investigation is ongoing.
A Jerusalem court on Friday agreed to hear preliminary testimony from Talansky at an open hearing. The date was not set. State prosecutor Moshe Lador said Talansky expressed concern to police that Olmert would send someone to harm him, Israeli media reported.
Olmert has denied any wrongdoing and said he would only resign if indicted. But political opponents and Israelis said the latest suspicions of criminal misconduct were diverting Olmert's attention from running the country.
'We need a much better leader'
"A state like Israel, with an existential threat, needs a full-time prime minister," said Arieh Eldad of the hard-line National Union party. "We need a much better leader at this time, and Israel should go to general elections in order to replace him with a better government."
Elections do not seem imminent because his coalition hasn't indicated they want to move up the vote, scheduled for late 2010. Polls suggest that neither his Kadima Party nor his coalition partners would benefit from early balloting.
Any indictment would likely take months to hand down, so Olmert's resignation does not appear to be immediately in the offing.
Olmert might have to keep rivals within his own party at bay, however, to avoid being ousted as head of Israel's largest political party — a position that earned him the premiership. In Israel, the prime minister is not directly elected, but is generally head of the party with the most seats in parliament.
Palestinian negotiator Saeb Erekat said the Palestinian government was following the developments "very carefully."
If Olmert is forced out and early elections ensue, "the peace process will be on hold for a year," he said.
Peace talks, relaunched in November after a seven-year breakdown, are already dogged by long-standing conflicts over security and settlement-building. Questions about the health of Palestinian President Mahmoud Abbas, following an unannounced heart test, have added another layer of uncertainty to peacemaking.
President Bush's trip still on schedule
The White House said the case would not alter President Bush's planned visit to Israel next week, calling the investigation "a matter for the Israeli judicial system."
Olmert was questioned about the case a week ago at his Jerusalem residence. Police spokesman Micky Rosenfeld said if necessary, Olmert would be questioned again.
Talansky arrived in Israel last month and has been questioned by police. But investigators asked for the preliminary testimony, fearing he would be reluctant to return to Israel to testify against Olmert.
A gag order was imposed on the affair last week after word broke that Olmert was going to be questioned, though some details were published by foreign media.
After the gag order was partially lifted — at the end of what was to have been a festive 60th Israeli Independence Day celebration — Olmert went on national TV on Thursday to state his case.
His campaign finances, he said, were the responsibility of a lawyer named Uri Messer, a longtime confidant linked to other corruption suspicions involving the prime minister.
"I am looking all of you in the eye, and I say I never took bribes, I never took a penny for myself," he said.
Olmert said Talansky had contributed to his two Jerusalem mayoral campaigns, and a campaign for chairman of the Likud Party before he left to join Kadima. Talansky also gave him money to cover campaign debt, he said.
Talansky's attorney, Jack Chen, declined a request Friday to interview his client and would not comment on the case.
Olmert is a suspect in several corruption affairs involving real estate deals and questionable political appointments. He has been questioned several times by police but has never been convicted. All the cases relate to events that took place before he became prime minister.