Attorney General Menachem Mazuz is considering indicting Prime Minister Ehud Olmert in the Rishon Tours affair, Mazuz told Olmert yesterday.

Mazuz also told Shula Zaken, Olmert's former bureau chief, he is also considering indicting her.

Mazuz made his decision, pending the outcome of a hearing he will hold for Olmert, a few weeks ago but prefered to wait until Olmert returned from his just-completed Washington D.C trip.

The Rishon Tours affair involves suspicion that during Olmert's stint as minister of industry, trade and labor (2003-2006), and as mayor of Jerusalem (1993-2003), he financed his own and his family's private flights through money obtained fraudulently from public bodies. He may face charges of fraud, breach of faith and falsifying corporate documents, and income tax evasion.

Olmert's attorneys, Eli Zohar, Navot Telzur and Roy Blecher said in response to Mazuz's announcement: "The prime minister utterly rejects the suspicions against him in the matter of Rishon Tours. The decision to summon the prime minister to a hearing on this matter, when other affairs are still under investigation and/or no decision has been made, is a surprising and even unreasonable one."

Mazuz ordered a criminal file opened against Olmert in June in the Rishon Tours affair, with suspicions emerging that he had allegedly defrauded several organizations, among them the AKIM organization for developmentally delayed children, Israel Bonds, Yad Vashem, the Simon Weisenthal Center, the March of the Living, Keren Hayesod, the World Jewish Congress and ORT. Olmert is suspected of demanding, through Zaken and another staff member, Rachel Raz-Risbi, reimbursment from two or more groups for his flights as well as from the state.

It is believed that some $85,000 accumulated in an account at Rishon Tours, which was used for Olmert family trips abroad and for upgrades.

Olmert's attorneys were informed yesterday by letter of suspicions that with Olmert's knowledge and on his instruction the bodies funding his trips were systematically presented with false documents stating that they were paying for his flight and occasionally for those accompanying him, and that it was concealed from these bodies that other groups were also being asked to pay for the trips.

In their statement yesterday, the prime minister's lawyers also said Olmert was "shocked to read in Attorney General Menachem Mazuz's letter details and claims about which he had not been questioned...in complete opposition to the statement by the attorney general, the prime minister was presented with no evidence on which to base the idea that he was aware of the alleged acts."

According to the State Prosecutor's Office, these alleged acts of fraud were also commited against the state, since some of his trips were made as part of his ministerial post and were funded by the state. Olmert is suspected of presenting false documents to officials in the Industry, Trade and Employment Ministry.

The State Prosecutor's Office claims that by these alleged acts, Olmert also unlawfully received payment or benefit deriving from his post.

Olmert is also suspected of fraudulently concealing this income from the State Comptroller. The State Prosecutor further suspects that Olmert concealed the income from the tax authorities in his annual tax returns.

The State Prosecutor notes that Olmert's conduct in general constitutes taking advantage of his position over the years for monetary benefit with trips paid for by public organizations and by the state in a manner opposed to norms and rules obligating a minister and a public servant, and that such acts constitute fraud and breach of faith.

The State Prosecutor's Office has also not yet decided whether to indict Olmert on allegations that he accepted illicit funds over many years from a Long Island businessman, Morris Talansky. In his preliminary deposition in Jerusalem on May 27, Talansky testified that he gave Olmert $150,000, mostly in cash, for political campaigns and travel expenses.

Contacts with American authorities to allow Talansky to complete his preliminary testimony have not yet been concluded. Talansky has said that because of the investigation against him in the United States, he does not intend to come to Israel to complete his testimony unless he is given a kind of immunity, because of concerns his testimony here may implicate him in the U.S.

Justice officials said yesterday that the claim that Mazuz is delaying his decision regarding Olmert until after the elections is unfounded. The officials also said that even if Olmert is charged on other counts, it has been decided not to wait with an indictment until the conclusion of the investigations by the state prosecutor on these matters.

Sources said yesterday that the investigation by State Prosecutor Moshe Lador of suspicions that Olmert interfered in the privatization of Bank Leumi to benefit a friend is at a very advanced stage and a decision is expected soon.

The police are still investigating allegations that Olmert, while serving as the industry, trade and labor minister, allegedly granted large state investment funds to a company which his close associate and former law partner, Uri Messer, had been hired to represent.

Olmert's media adviser, Amir Dan, said "After the State Prosecutor's Office took a hard blow in the Talansky affair and after they brought down a sitting prime minister, it is clear that the Justice Ministry cannot make do with anything else, and there were no other expectations in this matter. As with Talansky's deposition, now too the State Prosecutor's Office is presenting a mistaken, one-sided picture, which will crack and collapse."

Mazuz may be asked soon for an opinion regarding Olmert's possible incapacitation. A senior judicial official said yesterday that "the matter depends mainly on Olmert," and that Mazuz has said that incapacitation is a matter for public and political discourse, and not a legal issue.