Olmert to be investigated by police over role in bank privatisation

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Police have opened a criminal investigation into the role of the Prime Minister, Ehud Olmert, in the privatisation of an Israeli bank.

It has been alleged that in 2005, when Mr Olmert was finance minister, he favoured business associates during the sell-off of a controlling share of Bank Leumi, one of Israel's largest financial institutions.

A controlling stake of Bank Leumi was eventually bought by a US investment group to which the businessmen were unconnected. Mr Olmert has denied any wrongdoing. If he is indicted, he would have to step down, according to legal precedents.

The Justice Ministry said a preliminary investigation of the allegations raised in a report by the state comptroller about the bank sale "led to the conclusion that a foundation of evidence has been built that would justify opening a criminal investigation". After the investigation is completed, the findings will be turned over to the Attorney General's office, which would have the final say about whether an indictment is filed. The process is likely to take several months.

Mr Olmert has been dogged by corruption allegations throughout his long political career, but no formal charges have been laid. He 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 offences; a former justice minister, Haim Ramon, is on trial for allegedly forcibly kissing a female soldier and the Finance Minister, Avraham Hirchson, could be implicated in an embezzlement case from a previous post he held. They all deny any wrongdoing.

Miri Eisin, a spokesman for the Prime Minister, refused to comment.

* The Israeli army commander Lt-Gen Dan Halutz, who was under pressure for failures in last summer's war in Lebanon, resigned last night. Army Radio reported that General Halutz said in his letter of resignation to Mr Olmert that he was taking responsibility for the outcome of the war.