Gag Order Lifted, Israel Obsesses Over Corruption Probe Targeting Prime Minister

| Thu May 8, 2008 5:49 PM EDT

As the sun set on Israel's 60th Independence Day celebrations tonight, Israeli media were partially liberated from a gag order that had restricted their reporting details of a fast moving and curiously timed corruption investigation of Israeli prime minister Ehud Olmert. The probe's quickening pace now is curious given that it is focusing on financial transactions between Olmert and an American financier and philanthropist that date back to the 1990s when Olmert was mayor of Jerusalem and a cabinet minister in the government of Ariel Sharon.

"Olmert suspected of accepting illicit funds from U.S. businessman," a Ha'aretz headline proclaimed:

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Olmert is being investigated for allegedly receiving hundreds of thousands of dollars from Morris "Moshe" Talansky, a Long Island based financier and philanthropist.

In a late night news conference, Olmert conceded that he had taken funds from Talansky, but told journalists that there was nothing illegal about the payments. "I never took bribes, I never took a penny for myself." He said he had confidence that his attorney Uri Messer "handled the money professionally and according to the law." (You can see a video of Olmert's press conference here).

Olmert also said that he would resign if indicted. "Even though the law does not require me to do this, I will resign from my job if the attorney general decides to issue an indictment against me."

All this drama takes place as President Bush is set to arrive in Israel Tuesday to mark its sixtieth anniversary celebrations, and to try to advance peace efforts.

The Olmert probe will likely hobble those, said MJ Rosenberg, of the Washington-based Israel Policy Forum, which supports a two-state solution. "Israeli politicians are always looking for excuses not to do the peace process," Rosenberg said. "That is the main impact of this."

So said a senior Palestinian offiical: "As of now there is no Israeli partner for talks on a final status agreements in light of the continuing investigation against Olmert," Ha'aretz cited an unnamed senior Palestinian Authority official.

In an interview with Israel's TV Channel 2, Talansky, the New York financier reported as being linked to the probe, said that he was baffled by the investigation. He said he had arrived in Israel last month to visit his children. Tuesday morning at 6:00 a.m. the police knocked on his door and asked him to come with them. He went with them and told them that he has known Olmert for more than twenty years and has met him at many events.

Among his philanthropic activities, Talansky, 75, served as a fundraiser and US contact for a Jerusalem based foundation, the New Jerusalem Foundation, founded by Olmert when he was mayor of Jerusalem. The foundation "centers its efforts on soliciting donations from Evangelical Christians," the Forward reported.

The New York Sun previously reported that Talansky was among a group of American investors who are suing Israeli Aerospace Industries, for succumbing they claim to Israeli government pressure to block satellite deals with countries including Venezuela and Angola.

A registered Democrat, Talansky, has "donated to many American candidates on both sides of the aisle," the New York Times reported. "He gave President Bush $1,000 in 2003, and was a generous donor to Rudolph W. Giuliani in 2000. Among his Democratic beneficiaries have been President Bill Clinton in 1995; Thomas S. Foley, then the House speaker, in 1994; and Senator Edward M. Kennedy in 1992."

A Talansky cousin interviewed by the Times discounted speculation that Talansky had been part of a right wing effort to hobble Olmert at a time when Washington may be pressing him to stop settlement expansion in order to advance the Israeli Palestinian peace process. ""He's no extremist in any way," the Times cited Rabbi Abraham Talansky of his cousin.

But some media reports suggested Talansky was being investigated for his role as a suspected conduit for others trying to buy influence or favors from Olmert. "According to Israeli sources, investigators are probing allegations that Talansky served as a conduit between American donors and Olmert, as well as allegations that Talansky himself provided funds to Olmert," the Forward reported.

In 1999, Olmert ran against Ariel Sharon to be the Likud candidate for prime minister. A campaign finance investigation dating back to that time previously led to charges against people close to Sharon, including his son Omri, currently serving a prison sentence, the NY Times earlier reported.

Media reports Friday suggested several potential witnesses, including Talansky and Olmert's former law partner and confidant Uri Messer, were considering giving testimony for the prosecution against Olmert in exchange for immunity.

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