Accountant-General Yaron Zelekha testified Monday at the police national fraud unit in Bat Yam on the state's sale of a controlling interest in Bank Leumi.

Prime Minister Ehud Olmert is also under investigation for his role in the sale, which took place during his stint as finance minister.

Police believe that Zelekha is a key witness in the investigation, but say their chances of indicting Olmert are "borderline."

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According to NFC news Web site, Zelekha previously testified that the Finance Ministry's legal advisor and sister of the attorney general, Yemima Mazuz, warned him during the process of the sale against confronting Olmert, who she termed as "dangerous."

In addition, Zelekha said that Olmert had concealed his own conflict of interest from Mazuz, in trying to skew the tender terms on behalf of his associates.

The offer to sell off the controlling interest in Bank Leumi was first issued in November 2005, four months after Olmert replaced Benjamin Netanyahu as finance minister in the government of former prime minister Ariel Sharon.

Olmert took an active role in the privatization process and claimed that the amendments he was promoting in the tender were designed to change the makeup of the investors taking part in the bid.

According to the allegations, however, these amendments were designed to steer the tender towards Australian real estate magnate Frank Lowy, a friend of Olmert.

Lowy's group withdrew from the bid shortly before it closed.

The suspicions against Olmert first emerged during an audit of the sale by State Comptroller Micha Lindenstrauss. The comptroller heard testimony from Zelekha and other officials in his office.

After finishing his audit, Lindenstrauss transferred the material to Attorney-General Menachem Mazuz, who then asked the police to conduct "preliminary inquiries" into the matter.

According to State Prosecutor Eran Shendar, this included questioning some additional people involved in the sale, aside from those who spoke with Lindenstrauss.

Based on these findings, Shendar decided to launch a criminal probe against the prime minister.

Menachem Mazuz recused himself from the affair because of his sister's connection to the case.