Israeli leader denies taking illicit donations from American

The latest investigation into corruption allegations involving Olmert has distracted Israel for nearly a week and has the potential to derail delicate peace talks with the Palestinians.

Olmert made his statement in a nationally televised speech from his official residence after a court lifted a gag order in the case. According to police suspicions, Olmert took hundreds of thousands of dollars in illicit contributions from Jewish businessman Morris "Moshe" Talansky.

Army Radio said the suspicions concern money that Olmert allegedly received from 1999 to 2003, when he was mayor of Jerusalem and later minister of industry and trade.

Olmert said a lawyer handled his finances and everything was legal. "I am looking at all of you in the eye, and I say I never took bribes, I never took a penny for myself," he said.

But he said he would not fight to stay in office if he was charged.

"I was elected by you, citizens of Israel, to be the prime minister and I don't intend to shirk this responsibility. At the same time, and 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," he said.

This is the fifth high-profile probe involving the Israeli leader, whose popularity has badly suffered because of the repeated corruption allegations. He has not been charged in any case, but even before the gag order was lifted Olmert's opponents were calling on him to resign.

While Olmert's office has predicted he will weather the latest storm, the case threatens to further weaken his hold on power and potentially torpedo formal peace talks with the Palestinians launched last November at a U.S.-hosted peace conference at Annapolis, Md.

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."

"The president looks forward to traveling to the Middle East next week to continue to encourage the Israelis and Palestinians to work together for a two-state solution," said Gordon Johndroe, the president's national security adviser.

Olmert said Talansky had made contributions to him for two mayoral campaigns for Jerusalem, one campaign for chairman of the Likud Party and another to cover campaign debt retroactively.

He said he has served the Israeli public in different roles for more than 30 years, and like any prime minister is now dealing "with important and sensitive issues which concern our existence as a people and as a state."

"I am sorry about the rough times that the public is going through, as are those who are close to me. I hope that this storm, too, shall pass with the same speed by which it was ignited," he said.

Olmert's statement, and the court's decision to lift the gag order on the case that first came to light about a week ago, came as Israelis celebrated their nation's 60th anniversary.

Israel's Channel Ten TV said Thursday that Talansky was suspected of being a middleman for illegal campaign contributions and that he told Israeli interrogators everything he knew about the case.

Channel Two TV said that Olmert received hundreds of thousands of dollars in cash from Talansky in a series of meetings, while Olmert was Jerusalem mayor.

Talansky told Channel Two that he was in Israel visiting family for the Passover holiday when he was called in for questioning. He said that he was "baffled" by the case and that he did nothing wrong.

"They (police) knocked on my door at six in the morning and it was the national police and they asked me to come with them and I obliged ... and it was very surprising. When they asked me details, I said whatever I know," Talansky said.

Referring to his relationship with Olmert, he said, "We are very, very friendly and I used to meet him all the time at dinners in New York."

If Olmert is indicted, he would probably have to resign, though a decision on whether to indict is likely to take at least several weeks, if not months. Israeli law restricts how much politicians can get from donors.