Olmert may face criminal probe

The Israeli government's chief watchdog has recommended a criminal investigation into a deal by Ehud Olmert before he became prime minister.

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This further weakens the embattled Israeli leader, whose popularity has plummeted since last summer's inconclusive war in Lebanon.

The state comptroller, Micha Lindenstrauss, issued a lengthy report charging that when he was trade minister in 2001, Mr Olmert interfered improperly in the process of awarding grants to Israeli businesses through the ministry's Investment Centre, favouring a colleague.

Mr Olmert has consistently denied wrongdoing in all the cases that have emerged in recent years, including real estate deals with questionable profits and alleged attempts to skew the tender for sale of a large bank to benefit backers.

In a statement today, Mr Olmert's office denied all wrongdoing, saying he acted properly and with professionalism. "We have no doubt that this affair, like all the other affairs examined by the state comptroller and ended in nothing, will disappear like foam on water," the statement said.

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Mr Lindenstrauss has opened himself up to criticism by using tactics designed to win his investigations the maximum coverage, saying he is using the media as one of his tools to keep Israel's government clean.

Ultimately the Israeli attorney general has the final say about whether a criminal investigation will be opened, but the rapidly growing pile of potential scandals is harming Mr Olmert's standing, at a time when his popular support is approaching single figures because of the Lebanon war.

That could come to a head next Monday, when the commission he appointed to investigate the troublesome conflict presents its interim report. Analysts say it will harshly criticise Mr Olmert and his defence minister, Amir Peretz, for their decision-making processes in ordering a large-scale operation in response for a cross-border attack by Hezbollah guerrillas, who killed three Israeli soldiers and captured two others.

In the 34-day conflict that followed, the military failed to achieve the goals Mr Olmert stated – returning the captured soldiers and crushing Hezbollah, which fired almost 4,000 rockets at Israel.

The Investment Centre case has been in the works for months. Mr Lindenstrauss found that Mr Olmert erred through involvement in a grant for a business involving his friend and former partner, lawyer Uri Messer.

"Olmert should have removed himself completely from dealing with the company's request, put forward by Messer, and in not doing so placed himself in a conflict of interest (situation)," Mr Lindenstrauss wrote.

The latest allegation set off a string of demands from Israeli politicians that the premier step down.

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