Attorney General Menachem Mazuz is soon likely to order a criminal investigation against Prime Minister Ehud Olmert over suspicions of fraud and breach of trust. The suspicions against Olmert stem from his tenure as industry and trade minister, when he allegedly helped grant favors to a factory represented by his former partner, attorney Uri Messer.

State Comptroller Micha Lindenstrauss presented Mazuz with a caustic report yesterday entitled "Israel Investments Center - Uri Messer." According to the comptroller, Olmert's involvement in the affair "in spite of the evident conflict of interests raises concerns that ethical conduct was violated." He recommended that the attorney general order a criminal investigation against the prime minister.

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Senior officials at the Justice Ministry have said privately in recent weeks that it seems a criminal investigation against Ehud Olmert in the case of the Investments Center is inevitable. The Investments Center is under the Industry and Trade Ministry.

In recent months, Lindenstrauss sent State Prosecutor Eran Shendar and Mazuz investigative materials and evidence as it accumulated. However, the attorney general opted to wait until the comptroller completed his report before deciding on a criminal investigation.

"The final report was received just now," a Justice Ministry official said yesterday, "and it will be evaluated as the prosecutor's office normally does, along with other relevant materials, and then the matter will be brought before the attorney general for a decision."

If a decision is made to initiate a a criminal investigation against the prime minister, it will run in parallel with another investigation into Olmert's alleged role in the sale of the controlling share of Bank Leumi while he was finance minister.

In the case of Bank Leumi, Olmert is suspected of attempting to intervene in the tender for privatizing the controlling share of the bank on behalf of his friend, the Australian businessman Frank Lowy. The police national fraud squad is carrying out a criminal investigation.

The state comptroller is soon expected to publish another report on an affair involving the prime minister. This report is on the sale of the Cremieux Street, Jerusalem home. In this case as well, Lindenstrauss is expected to recommend the attorney general embark on a criminal investigation.

Olmert allegedly received a discount of several hundred thousand dollars when he purchased the home.

The Prime Minister's Bureau yesterday issued a sharp rebuke of the state comptroller and his report.

"The prime minister has lost his confidence in the state comptroller, whose behavior in this matter has broken records for its lack of professionalism and bias," one of the statements read. The statement also accused Lindenstrauss of caring only about television ratings and timing his work based on media deadlines.

In his report yesterday, Lindenstrauss wrote, "Olmert did not avoid discussing or dealing with a matter that involved his friend, former partner and current attorney Uri Messer, who represented an enterprise that sought economic benefit from the state through the Investments Center of the Industry and Trade Ministry.

"Olmert should have entirely stepped back from dealing with the request by the company represented by Messer. By not doing so, he was party to an illegal conflict of interest. Olmert's ties with Messer and his crucial involvement in furthering the project and altering the criteria that professionals had established, in spite of the evident conflict of interest, raise concerns that ethical conduct was violated," Lindenstrauss wrote.

The affair involves a factory that filed a request in 2001 to have its status upgraded to that of an "approved enterprise," entitling it to state benefits and grants. The request was not considered until 2003, at which time the factory hired the services of attorney Uri Messer.

Messer, Olmert's friend, former partner and personal lawyer, headed an organization supporting Olmert's 1998 election campaign for the post of Jerusalem mayor. However, in spite their business association, Olmert, as industry and trade minister and head of the body responsible for the factory's status, did not disqualify himself from discussing the matter "actively and intensively," and "taking decisions and instructing the professional team, which expressed many reservations about this factory."

The report notes that "the pressure by the minister and his aides for expediting the process, their repeated requests to the officials of the Investments Center, their modus operandi, their involvement in the details of the deal regarding the benefits to be given to the enterprise, and their extent -- all these were more than 'minor action' in favor of the entrepreneur. When Olmert failed to withdraw completely from dealing with this matter ... he violated his duty to avoid a conflict of interest and acted improperly. The actions of his aides on his behalf were also found to be improper."

The prime minister's response to the state comptroller's report was delivered, contrary to the norm, to the attorney general, and not to Lindenstrauss.

Regarding the suspicions, the Prime Minister's Bureau issued a statment saying that Olmert "did not and does not have any ties with the entrepreneur [behind the] factory. The prime minister's acquaintance with the entrepreneur's attorney is insufficient to prevent him from fulfilling his professional duties as a minister, according to the ruling of the High Court of Justice. In view of this, we have no doubts that this affair, too, like all the other affairs examined by the comptroller, will come to naught."

"It may have been better had Olmert not been there and we were not facing this problem," his attorney Eli Zohar told Haaretz yesterday. "But there is no substantive or legal justification that Olmert should have disqualified himself from deliberations in this matter. This may appear to be a conflict of interests, but not a blatant conflict of interests, and also not an illegitimate conflict of interests. It is true that Messer was Olmert's partner 20 years earlier and that he is occasionally dealing on his behalf with real estate deals, but their association did not create any bond that establishes the sort of commitment that requires the minister to consider disqualifying himself."

Messer was not available for comment.