Israeli PM Olmert questioned by fraud investigators

October 9, 2007

Jerusalem - Ehud Olmert, Israel's Prime Minister, was grilled by police for hours Tuesday morning over his part in a bank privatization deal.

He is suspected of trying to influence the sale of the state's controlling interest in Bank Leumi in favor of a friend while finance minister in 2005.

Olmert has denied any wrongdoing. He has faced other corruption inquiries, but no formal charges have been filed.

Last month, the attorney-general opened a criminal investigation into his purchase of a property in Jerusalem.

The move came after a government watchdog concluded Olmert paid $325,000 below market value for the house to a developer.

Other politicians have also been blighted by serious allegations. Earlier this year, Israel's former President, Moshe Katsav, struck a plea bargain with the attorney-general to avoid rape charges.

He was questioned on Tuesday at his official residence in Jerusalem by three National Fraud Unit investigators, police said.

The investigators were expected to ask the prime minister what his role was in convincing his friend, the Australian businessman Frank Lowy, to enter the bidding for Bank Leumi, whether any of the changes he introduced in the tender were at Lowy's behest, and why he failed to inform anyone of a possible conflict of interest.

Olmert has said he persuaded officials to make several changes to the tender in order to encourage strategic investors to bid for the bank.

At the end of the investigation, the police will present their recommendation to the State Prosecutor's Office.

Observers say it may be difficult to prove any wrongdoing because Lowy ultimately withdrew his bid and there seems to be no evidence of Olmert having received anything in return.

However, the prime minister could face charges of breach of trust if it is proven he took an active role in the sale despite an apparent conflict of interest.

Olmert is the last person to be questioned in the case. Israeli police questioned Lowy in Australia in May.