FBI Reportedly Investigating Ehud Olmert

Just when it seemed as though the mantle of sleaze clinging to Israeli Prime Minister Ehud Olmert could not get any thicker, it did.

According to a report in the Israeli media (Hebrew link), the prime minister of Israel is the target of yet another criminal investigation — this time in the United States. The FBI is looking into what appears to be concrete evidence of Olmert’s complicity in money laundering and illegal solicitation of financial contributions.

For four months, Olmert has been under the latest of a series of criminal investigations in Israel. This time, he is suspected of accepting cash-filled envelopes amounting to at least $150,000 from Long Island Jewish businessman Morris (Moshe) Talansky over a period of 15 years, when he was alternately minister of trade and industry and mayor of Jerusalem. Police investigators have hinted strongly that Talansky transferred several hundred thousand dollars more to Olmert, via the prime minister’s former law partner.

Olmert claimed that the envelopes of cash were reimbursement for legitimate expenses, while the state claimed that the money was either acquired under false pretences (“campaign contributions”), or that Talansky was bribing Olmert for his business connections. The prime minister has denied receiving money from Talansky via Uri Messer, his former law partner.

The FBI entered the picture shortly after Talansky’s first deposition in Jerusalem in May. Israeli investigators flew to New York to meet with federal officers, where they apparently turned over a substantial paper trail. The federal probe led to the New York-based New Jerusalem Fund, which was managed by Talansky — but headed by Olmert.

According to Israeli journalist Yoav Yitzhak the fund, which was ostensibly set up to raise money for Jerusalem renewal and NGO projects, was in fact a front for money laundering. So far, the investigators are talking about approximately $500,000 in unaccounted for funds.

FBI investigators have already discovered that Olmert played an active role in deciding how contributions made to the fund should be used. NFC has been informed that investigators have uncovered a disparity between the amounts raised by New Jerusalem in the United States and the amounts the fund’s managers claimed were transferred to the Jerusalem branch and other bodies. In other words, the FBI suspects that funds were either stolen or laundered.

Talansky came to Israel voluntarily for his initial deposition and then his cross-examination. He has now refused to return for a third round of questioning. Apparently his lawyers have finally woken up to the fact that their client was liable to incriminate himself in the United States for tax evasion or money laundering.

So how does all this affect Olmert and Israeli politics? Interestingly, the FBI investigation might work in Olmert’s favor.

Last month, the prime minister claimed he intended to resign. In a dramatic speech delivered live from the prime minister’s residence at the top of the regular evening news hour, he said that he would not be a candidate in the September 17 primaries for Kadima, the party he now heads, and that he would resign once a new party head was elected.

As journalist and blogger Yossi Gurvitz points out (Hebrew link), a televised speech is not the legal procedure for resigning. If Olmert had really intended to resign, he would have had an official meeting with President Shimon Peres at the latter’s residence. Gurvitz believes that Olmert’s so-called resignation speech was just another tactic — a ploy to gain time.

The prime minister’s legal team succeeded in raising serious doubts regarding Talansky’s credibility during their cross-examination in July. If Talansky’s American attorneys fail to arrive at some kind of immunity-for-testimony deal with federal investigators, then it is very unlikely that the Israeli prosecutors’ office will have an opportunity to re-examine the Long Island businessman.

In that case, Olmert could well be in a position to convince the state prosecutor to drop the investigation for lack of evidence.

Meanwhile, Kadima’s two leading candidates are highly problematic. Minister of Transport Shaul Mofaz is leading within the party, but Foreign Minister Tzipi Livni is, according to the polls, the most popular politician in the country. Kadima members see Livni as a threat; unlike Mofaz, who has shown himself to be a pragmatist that goes along to get along, Livni is perceived as a wild card who would shuffle cabinet seats and ministerial positions, removing many from the positions of power they enjoy.

If Mofaz were to win the primaries, he would be highly unlikely to succeed in bringing Kadima to an electoral victory. The former chief of staff is not a popular figure. He is singularly lacking in charisma, imagination and humor; his rise through the army ranks is generally regarded as a classic example of the Peter Principle. As minister of transport he has distinguished himself mostly for driving up the price of oil by hinting strongly, in remarks that were the subject of wide contempt in Israel, that the IAF was planning to strike Iran’s nuclear facilities.

If Livni were to win the primaries she might succeed in winning a plurality of votes for Kadima in the national elections, but she would face severe obstacles in forming a coalition. (Israel’s fractured parliamentary system makes it impossible for a single party to win the necessary 61 out of 120 Knesset seats to form a government.) The religious party Shas, for example, might well refuse to join a coalition headed by a woman — unless she were to break the budget for their social programs. And even if she were to succeed in putting together a coalition, it would probably be a fragile one vulnerable to collapse.

Given either scenario, Olmert, who currently has a 2 percent approval rating and just survived three no-confidence votes, might actually start to look attractive.

In which case, he could announce that he is not going to resign after all. In the best interests of the country, of course. Which, to no one’s surprise, will just happen to coincide with the best interests of Ehud Olmert.