U.S. financier at center of Olmert case

By Adam Entous

JERUSALEM (Reuters) - A Jewish American financier who says he has never been involved in politics is at the center of an Israeli police investigation into bribery allegations that threatens to bring down Prime Minister Ehud Olmert.

After the lifting of a week-old police gagging order, media could report on Thursday that Olmert's relationship with Morris Talansky dates back two decades when both were involved in fund-raising for a hospital in Jerusalem.

Talansky later served as treasurer of a charity, the New Jerusalem Foundation, that was founded by Olmert in 1999 to finance projects in the city of which he was mayor. Talansky earlier helped fund Olmert's election campaigns for city hall.

In his first public comments on the affair, New York-based Talansky, who has close family ties with Israel dating back decades, flashed a thumbs up to the cameras on a Jerusalem street and said: "I don't understand what's the big deal."

The investigation focused on the period from 1998 to when Olmert became prime minister in 2006, police said.

Judicial sources said the case involved hundreds of thousands of dollars. Other sources familiar with the probe said police believed Talansky was referred to as "The Laundry Man" in coded notes kept by Olmert's long-serving personal assistant.

Olmert said on Thursday the money was only for campaign funding and that he did not benefit personally. "Mr. Talansky helped me raise funds for the election campaign," said Olmert, adding, however, that he would resign if indicted.

Talansky described his two-decade relationship with Olmert as "very, very friendly".

"I'm not involved in politics. I never was involved in politics," he told Israel's Channel Two television, rejecting suggestions he was part of a smear campaign by Olmert's right-wing rivals to derail peace talks with the Palestinians.

SURPRISE

Talansky said he came to Israel last month for the Passover holiday and was surprised when police knocked on his door at 6 a.m. one morning.

"Very, very strange. I went downstairs and they said, 'We're the police.' And they asked me to come with them. And I obliged and I went with them," he said.

Talansky, who has been in Israel regularly since 1959, said he was raised in a "very Zionist family". He has a home and dozens of relatives in Israel, including a great grandchild.

Olmert was mayor of Jerusalem for 10 years until 2003.

Between 1999 and 2002, the New Jerusalem Foundation of which he was then president, reported receiving $855,516 in gifts, grants and other contributions, according to U.S. tax returns.