Police Question Israeli Prime Minister

Israeli Prime Minister Ehud Olmert gestures during a meeting of his Kadima Party, Petah Tikva, Israel, in this Thursday, Sept. 20, 2007 file photo. Israeli police arrived at the official residence of Prime Minister Ehud Olmert on Tuesday to question him in connection with the privatization of Israel's second-largest bank, one of two cases in which he is being investigated on suspicion of corruption. (AP Photo/Sebastian Scheiner, File) (Sebastian Scheiner - AP)

JERUSALEM -- Israeli police questioned Prime Minister Ehud Olmert for five hours Tuesday as part of an investigation into whether he interfered in the sale of the country's second-largest bank.

Though not a surprise, the timing of the questioning was a fresh setback for the Israeli leader whose popularity was starting to revive from criticism over last year's inconclusive war in Lebanon.

Olmert got a small reprieve, however, after Israeli media reported that the commission investigating the war decided it will not directly blame him for its failures. The decision would ease pressure on him to resign over his handling of the 34-day conflict.

The investigation into the privatization of Bank Leumi is one of two criminal probes facing Olmert. He also is suspected of buying a Jerusalem home from a real estate developer at a substantial discount in return for helping the builder obtain construction permits from Jerusalem authorities. Olmert has denied any wrongdoing.

Investigators questioned Olmert at his official residence on suspicion of breach of trust, police spokesman Micky Rosenfeld said. The prime minister will be questioned again Thursday, he said.

He gave no further details.

Authorities suspect Olmert tried to rig the government's sale of a controlling interest in Bank Leumi in favor of two associates when he was finance minister in 2005. The associates, Australian real estate developer Frank Lowy and American billionaire S. Daniel Abraham, never submitted a formal bid for the bank.

Olmert's office declined to comment after the questioning. But before the session, it expressed confidence that he will be cleared.

"At the end of investigation, it will emerge that all the decisions taken with regard to the privatization of Bank Leumi were professional and taken judiciously following consultations with relevant sources, and that his actions were above reproach," his office said in a statement.

The prime minister has been dogged by corruption allegations throughout his three-decade political career but never has been convicted.

While the police investigations pose no immediate threat to Olmert's job, they are another distraction for him as he tries to resolved the conflict with Palestinians.

Israeli newspapers reported Tuesday that the commission investigating the government's handling of the war will not directly blame Olmert for wartime shortcomings in its final report.

The commission's preliminary findings, issued in April, criticized Olmert for "very severe failures" but stopped short of demanding his resignation.

There had been widespread speculation that the final report, expected by the end of the year, would recommend he step down. The commission has no authority to fire Olmert, but a harsh conclusion would put pressure on him to resign.

The Haaretz daily said, however, that committee members had decided that their full findings would contain only "general conclusions and recommendations."

The war erupted July 12, 2006, when Hezbollah guerrillas killed three Israeli soldiers and captured two others in a cross-border raid. Israel's monthlong military campaign failed to retrieve the captured soldiers, destroy Hezbollah or prevent the Islamic group from pounding Israel with nearly 4,000 rockets, despite Olmert's declarations of outright victory.

A total of 160 Israelis, including 40 civilians, were killed. Between 1,035 and 1,191 Lebanese civilians and combatants were killed.