Prime Minister Ehud Olmert's attorneys are preparing to appeal to the Supreme Court against the state prosecutor's intention to hear preliminary testimony from Jewish American businessman Morris Talansky in the probe against Olmert.

The Jerusalem District Court on Friday accepted State Prosecutor Moshe Lador's request to hear preliminary testimony, after he said that Talansky had expressed concern to police that Olmert would send someone to harm him.

Legal sources close to Olmert expressed fury at the fact that the preliminary testimony was approved on the basis of Talansky's claim.

"The prime minister may be suspected of financial offenses, but he isn't a murderer," they said.

"To present the prime minister as a criminal figure who eliminates witnesses - there are limits to everything. This is a claim that shouldn't have been voiced and shouldn't have come to be. It isn't based on any fact or real suspicion and from the moment it came to be, it just shames whoever claimed it and the State of Israel in general," they continued.

The court ruled that Talansky's testimony would be given in an opening hearing but did not set a date.

Talansky had apparently agreed to testify if and when an indictment were issued against Olmert, but Lador argued that the more time passes, the less forthcoming Talansky would be in testifying, "especially since we are referring to testimony against someone who was a positive acquaintance of his for a number of years."

The state argued it wanted to hear Talansky's testimony without delay, "while he is still influenced by the initial shock of being interrogated as a suspect involved in criminal activities."

Police in the case are also considering the possibility of granting attorney Uri Messer the status of state witness in a corruption investigation being carried out against Prime Minister Ehud Olmert.

Messer, who is considered a close associate of Olmert, is suspected of accepting hundreds of thousands of dollars from American businessman Morris Talansky to pass on to Olmert and his former bureau chief Shula Zaken.

Police said that Messer has been cooperative in the investigation so far, and has apparently given incriminating evidence against the prime minister. Officials says Messer's role in the alleged affair was small in comparison to the suspicions against Olmert and Zaken.

Olmert admitted on Thursday that he accepted campaign donations from Talansky, but denied that they were bribes and said he would only resign if he were indicted.

In a terse, late-night televised statement to journalists at his residence in Jerusalem, Olmert said that all funds received were transferred to Messer.

"I never took bribes, I never took a penny for myself," Olmert said, adding that he had "full confidence that Messer handled the money professionally and according to the law."

He also said he would not fight to stay in office if he is charged over the allegations.

"Even though the law does not require me to do this, I will resign from my job if the attorney general decides to issue an indictment against me," Olmert said.

On Thursday night the gag order imposed on the case since last Thursday was partially lifted and information on the police investigation and suspicions against Olmert were revealed in Israel for the first time.

Earlier this week, New York newspapers published details on the case and the alleged role of an American businessman.

The prime minister is suspected of illegally receiving hundreds of thousands dollars from Talansky, an American businessman and fundraiser, during tenures as Jerusalem mayor and as minister of industry and trade in Ariel Sharon's government.

On Thursday night, Olmert acknowledged that he received funds from Talansky, whom he said he met two decades ago, as part of campaign contributions when he twice ran for mayor of Jerusalem.

The prime minister insisted that he did not take any of the money that Talansky raised on behalf of his political campaigns in 1999 and 2002 for his own personal use and rejected any allegations that he accepted bribes.

The investigators are also examining whether Olmert received funds, which they suspect were bribes, from other sources during the years preceding his tenure as a minister in the Sharon government.

The investigators' focus on the period Olmert served in the Sharon government contradicts Olmert's reference last night to his tenure as prime minister.

The investigators also suspect that the transfer of funds was carried out over a long period of time and included large sums.

According to the investigation material available to date, Olmert is suspected of meeting Talansky on his own, in Israel and abroad, while he served as minister of industry and trade, and allegedly received the money.

Police are investigating whether funds were transferred to Olmert also through go-betweens, including his former bureau chief Zaken, and his confidant, Messer.

The investigators are still not sure for now whether funds were taken by Olmert for his private use or whether they were used for other purposes.

However, law enforcement sources made it clear yesterday that it is now up to Olmert to prove the suspicions against him are wrong.

According to these sources, Olmert failed to dispel the suspicions against him during the interview investigators had with him last Friday.

"No one knows precisely where the money that was transferred to Olmert went," a source said. "We assume that the money was used for personal purposes and not for political purposes."

Olmert answered all the investigators' questions during the interview and denied breaking any laws in receiving the funds.

Haaretz has learned that Olmert told the investigators to ask Zaken about the funds, saying that she could offer details about his meetings with Talansky.

Olmert added that he does not remember the hundreds of meetings he had held with contributors from all over the world over the years.

Investigators suspect that Zaken is the one who coordinated the meetings with Talansky, and may have also been party to some of the money transfers.

However, Zaken, who was interviewed by police four times last week, retained her right to remain silent and gave no details to the investigators.

Talansky, who had visited Israel for Passover, was questioned by the Fraud Squad in their Bat Yam offices earlier last week, and offered a detailed testimony which bolstered suspicions against Olmert and Zaken.

This is the fifth investigation opened into the prime minister's activities since he took office in 2006.