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Kadima treasurer Yitzhak Hadad was arrested recently on suspicion of embezzling from the party. His remand was extended through Sunday.

An accountant and the party's logistics chief were arrested as well.

Hadad has denied all criminal wrongdoing, and his lawyer said he was arrested only for the sake of appearances.

Hadad has been treasurer for the party since it was founded in 2005. All of its transaction passed through him, said a source.

The three blurred the line between the party's money and their own money, said Ayelet Bornstein, head of the national fraud squad's investigation team.

The investigation began after the party complained a month ago that its external auditor had discovered financial irregularities.

Police found that Hadad had paid both the party's activists and poll staff via a private company that the party hired during the last round of national elections. That company was allegedly headed by the accountant and the computer technician.

A source familiar with the investigation said they discovered that the money paid to the company did not balance out with the money then paid to the activists and staff. The latter did not receive the full payment owed, they found.

Hadad is suspected of embezzlement, breach of trust, cooking the books and other offenses.

While some party sources emphasized that it was the party that contacted the police, and claimed that it operates transparently, others have complained that Kadima in fact it lacks transparency on many matters, including its finances.

Party head Tzipi Livni told Knesset members that while turning to police was unpleasant, the political system needed to cleanse itself and it was important to set a personal example for the public.