Israeli authorities on Tuesday said they were opening a criminal investigation into Prime Minister Ehud Olmert's role in the sale of one of Israel's largest banks.
The probe was the latest setback for Olmert, whose popularity has plummeted after last summer's inconclusive war in Lebanon and a series of corruption scandals involving top officials. But there appeared to be no immediate danger to the stability of his government.
Olmert took another blow early yesterday when the commander of the Israeli military, Lieutenant General Dan Halutz, abruptly resigned over the admitted failures of the war, leaving Olmert and his defense minister, Amir Peretz, to face an angry public.
Officials said the investigation would look into Olmert's role in the government's 2005 sale of a controlling interest in Bank Leumi, one of the country's largest financial institutions. The state comptroller, a government watchdog, has alleged that Olmert favored business associates during the sale. Olmert was finance minister at the time.
The Justice Ministry said a review of the comptroller's report "led to the conclusion that a foundation of evidence has been built that would justify opening a criminal investigation."
Police spokesman Micky Rosenfeld said the police anti-fraud unit would handle the probe.
He declined to say how long it would take.
Olmert has denied any wrongdoing in the case. His lawyer, Eli Zohar, said Olmert looked forward to a chance to clear his name.
"I welcome the decision to open an investigation so that once and for all we can end this irrelevant misunderstanding," Zohar told Israel Radio. "We hope the investigation will be conducted quickly and efficiently so that the witch hunt and criticism will disappear."
If Olmert is indicted, he would have to step down. But it could be months before a decision is made. Police must complete their investigation, then present their findings to the attorney general's office, which has the final say on whether to indict.
Attorney General Meni Mazuz has removed himself from the case because his sister holds a senior position at the Finance Ministry and took part in the Bank Leumi privatization process.
While the investigation proceeds, there should be no threat to Olmert's broad coalition government, said Reuven Hazan, a political scientist at Hebrew University in Jerusalem. However, he said it would cause further damage to Olmert's already dismal standing with the public.
An opinion poll published last week showed Olmert's approval rating at just 14 percent, and the hardline Likud Party would win if new elections were held.
"From the eyes of the public at large, this is the continued loss of faith in a leader who seems to be incapable ... and unfit to hold power," Hazan said. "I'm sorry to say he was already so far down with his approval ratings in the teens or single digits, there's not much further to fall."
The Lebanon war against Hezbollah guerrillas last summer caused Olmert's popularity plunge. Critics accuse Olmert of acting hastily in launching the war immediately after Hezbollah fighters invaded Israel and captured two Israeli soldiers. More than 1,000 people were killed on both sides, including 159 Israelis, in the 34-day war, but Israel failed to bring the soldiers home.
Olmert has repeatedly been accused of corruption allegations throughout his long political career, but has never been convicted. Olmert is also facing allegations involving real estate deals with major contributors.
Several other senior Israeli officials are facing legal problems. President Moshe Katsav could be indicted on charges of rape and other serious offenses, former Justice Minister Haim Ramon is on trial for allegedly forcibly kissing a female soldier and Finance Minister Avraham Hirchson could be implicated in an embezzlement case from a previous position.
Most recently, Olmert's longtime office manager was placed under house arrest on suspicion she arranged jobs for political allies in the Tax Authority in exchange for granting tax breaks to her brother and business associates.
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