Israel's Olmert admits taking cash but won't quit

By Alastair Macdonald

JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert admitted on Thursday taking cash from a U.S. businessman but resisted calls to resign over a police investigation into alleged hefty bribes over almost a decade.

As Israelis enjoyed festivities marking Independence Day and the 60th anniversary of the founding of their state, police lifted a week-old media gag order and announced details of accusations that sparked opposition calls for Olmert to quit.

He said he would resign only if he were formally indicted.

Whether he goes or not, doubt over his future is likely to upset his faltering, U.S.-sponsored peace negotiations with the Palestinians and will cast a heavy cloud over next week's celebratory visit to Israel by U.S. President George W. Bush.

The White House said Bush still intended to make the trip.

Olmert, in a late-night televised address to the nation, said: "I look each and every one of you in the eye and say, 'I never took bribes. I never took a penny for myself'."

His allies say there is a right-wing campaign to wreck the peace process, but it was unclear if his fragile coalition would rally behind a man who last year said he was "indestructible".

Israelis are no strangers to tales of corruption at the top in the Middle East's most feted democracy and the latest case may fuel calls for an overhaul of political funding rules.

Olmert, who was questioned by police for an hour last Friday, has weathered a string of investigations since he succeeded Ariel Sharon as prime minister in 2006. Sharon's son is in jail for campaign funding misdeeds on his father's behalf.

On Thursday, Olmert said all the cash he received -- put at hundreds of thousands of dollars by one judicial source -- was legitimate support from New York financier Morris Talansky to fund various election campaigns over nearly a decade from 1993.

"I was elected by you, the citizens of Israel, to be prime minister. I do not intend to shrug off this responsibility," he said. "However, although not required by law, if the attorney general decides to file an indictment against me I will resign."

Olmert, 62, said he did not believe the attorney general would follow through and indict him on the latest accusations.

CAMPAIGN FUNDS

In a terse six-minute address, Olmert said Talansky funded his two successful campaigns for mayor of Jerusalem in 1993 and 1998, an unsuccessful bid to lead the right-wing Likud party in 1999 and a further internal Likud election in 2002. He also said the American "helped me cover deficits" after elections.

Earlier, a police statement said: "The investigation deals with suspicions that the prime minister received significant sums of money from a foreigner or number of foreign individuals over an extended period of time."