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American Businessman Testifies in Corruption Probe That He Gave Cash to Israeli Prime Minister

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May 27: Jewish-American businessman Morris Talansky, front right, and his lawyer arrive at the District court in Jerusalem. (AP)

An American businessman told prosecutors Tuesday that he handed cash-stuffed envelopes to Israeli Prime Minister Ehud Olmert and suspected that some of the money went to funding Olmert's fondness for fine hotels and first-class flights.

Jewish-American businessman Morris Talansky's testimony is part of an investigation into whether Olmert illicitly took up to $500,000 in illegal campaign contributions or bribes before becoming prime minister.

Olmert has said the funds were legal campaign contributions and has promised to step down if indicted.

Talansky, 75, told the court that he turned over about $150,000 to Olmert, directly or through political aides, at meetings in New York and Jerusalem over a 15-year period. He said he never received anything in return for the money.

Talansky said he believed most of the money was for political campaigns but that Olmert also sought cash for vacations and unidentified personal expenses. Talansky said there was no record of how that money was spent.

"I only know that he loved expensive cigars. I know he loved pens, watches. I found it strange," Talansky told the court. In one case, he said, he walked to a bank to withdraw thousands of dollars in cash as Olmert waited in a luxury hotel.

There was no immediate comment from Olmert's office on Talansky's court appearance Tuesday.

The testimony was likely to further hurt the already unpopular Olmert. The investigation is the fifth that police have launched into Olmert's affairs since he took office in 2006, and there is widespread speculation that the savvy former attorney and Jerusalem mayor might not be able to weather the latest accusations.

Since Olmert has not been indicted, Tuesday's testimony was not part of a formal court proceeding against him. Instead, the court was taking Talansky's testimony because he lives in the U.S., and authorities are concerned he might not return to Israel to testify in the future.

Ahead of the testimony, State Attorney Moshe Lador told reporters not to jump to conclusions.

"There is no decision. We are at the height of the investigation. The case could develop in different directions down the road — there is a possibility that the whole case could be dropped, and there is also a possibility that another decision will be made in the case," Lador said.

Throughout Tuesday's questioning, Talansky repeatedly voiced admiration for Olmert, saying he was drawn to a brilliant, up-and-coming politician when he was running for Jerusalem mayor in the early 1990s. But he said he had grown disillusioned with the Israeli leader in recent years.

Olmert had the "ability to reach out to the American people, the largest and richest community of Jews in the world," Talansky said. "That's why I supported the man. That's why I overlooked, frankly and honestly, a lot of things. I overlooked them, maybe I shouldn't have."

Talansky said much of the money was raised in New York "parlor meetings," where Olmert would address American donors who then would leave contributions on their chairs.

Altogether, Talansky said he passed about $150,000 to Olmert. Some of the payments were meant to be loans but not all were repaid, Talansky said.

The donations took place before and during Olmert's 10-year tenure as Jerusalem mayor, which ended in 2003, and his subsequent term as trade minister. Olmert became prime minister in early 2006.

Throughout the period in question, Olmert was a leading politician in the hardline Likud party. In late 2005, Olmert bolted the Likud to help form the centrist Kadima Party, which he now leads.

Talansky described Olmert as a politician with magnetic appeal and insisted that Olmert never gave him anything in return for his support.

"I had a very close relationship with him, but I wish to add at this time that the relationship of 15 years was purely of admiration," Talansky said. "I never expected anything personally. I never had any personal benefits from this relationship whatsoever."

Talansky said Olmert volunteered to contact three billionaires to try to drum up business for a hotel minibar venture run by Talansky. He said the offer did not help.

Talansky said Olmert preferred cash over checks for reasons connected to Likud fundraising regulations — a habit that arose suspicions. "Cash disturbed me. I couldn't understand it and I accepted the answer simply because I saw something bigger, hopefully, out there," he said.

The last payment, he said, was about $72,500 for Olmert's Likud primary campaign in 2003. He said there had been no contact since Olmert became prime minister, except for a single meeting at a social function.

Olmert's lawyers tried to delay Talansky's testimony. But the American businessman, an ordained rabbi who has spent his career as a fundraiser for Jewish causes, wanted to testify so he could return home to Long Island, N.Y. Prosecutors told him Tuesday he may have to remain in the country.

Police have said the investigation spans a 12-year period when Olmert was mayor of Jerusalem and minister of industry and trade. Detectives have raided Jerusalem's city hall and the trade ministry and have questioned Olmert twice. His longtime assistant, Shula Zaken, and former law partner Uri Messer also have been questioned.