An internal opinion in the State Prosecutor's Office, which has yet to be adopted by the state prosecutor or the attorney general, recommends that a criminal investigation against Prime Minister Ehud Olmert be opened without delay. He is suspected of having acted to further the interests of two businessmen friends from abroad while serving as acting finance minister in 2005.

The state prosecution is investigating suspicions that Olmert interfered with the tender for the controlling interest in Bank Leumi to benefit businessmen S. Daniel Abraham and Frank Lowy. Olmert is also suspected of a conflict of interest through a law firm headed by Prof. Yossi Gross, Olmert's father-in-law, who dealt with Lowy's affairs in Israel.

In addition, Abraham had previously bought Olmert's Jerusalem home, at a price that was allegedly too high, while letting Olmert continue to live there and pay relatively low rent. It is thought that Abraham is one of the consortium of private investors trying to receive approval from the Bank of Israel to purchase control of Bank Leumi, along with the group of Cerberus Capital Management and Gabriel Capital Management, which won the tender in November 2005.

Olmert's relationship with both businessmen is suspected of being tainted by bribery, fraud and breach of trust.

(Note: The headline that appeared on this story on Haaretz.com during the course of Tuesday night was inaccurate.)

Attorney General Menachem Mazuz is expected to decide within a few days whether to order a criminal investigation. He had previously ordered the prosecution to look over the interim findings of a comptroller's report on the Bank Leumi tender, and the prosecutors who reviewed the case harshly criticized Olmert's conduct. However, Mazuz is not eager to order a criminal investigation before State Comptroller Micha Lindenstrauss completes his own probe of the matter, and may ask the comptroller to do so before he makes a decision.

Lindenstrauss told Mazuz about three months ago that the interim findings of the comptroller's report indicate possible criminal behavior, and asked whether he should stop his investigation so a police investigation can begin.

Officials in the Prime Minister's Office said on Tuesday they were "astonished" to hear about the prosecution's investigation and that the accusation that Olmert furthered the interests of Abraham and Lowy is illogical. They said Abraham did not submit a bid or establish a group that submitted a bid. Abraham's only involvement in the tender, a PMO official said, was that "it was discussed that maybe he would enter into a partnership with the winner, but that is certainly not something that's connected with the Finance Ministry." Lowy did take part in the tender, but did not win.

"Olmert's involvement in the tender proceedings was apparently very ineffective if he did not manage to cause his friend to win it," the official said.

The Movement for Quality Government asked Mazuz to freeze the sale of the controlling interest in Bank Leumi until it is determined that "there is no basis" for criminal suspicions on the matter.

Attorney Michael Dvorin wrote to Mazuz to urge a police investigation of the allegations of corruption.

"If police know that a criminal offense took place, they must open an investigation," he wrote. "For the inquiry to proceed via the prosecution before a police investigation has been opened is like putting the cart before the horse."

The Justice Ministry said in a statement that it was accepted procedure for Mazuz to ask the state prosecution to examine the comptroller's findings and give an opinion on how to treat the findings. It said the material was transferred to the prosecution so it could respond to the comptroller's request of "whether halting the State Comptroller's Office review is necessary in order to take inquiry-related steps already in this phase, or whether there is no obstacle to completing the comptroller's examination, and after the review is completed, the picture will be examined in its entirety, as usual in such circumstances, as has been done more than once in the past."

The ministry also said no criminal proceedings were underway and that the police were not involved in the inquiry process.

PM accused of improper political appointments as trade minister Lindenstrauss' advisor on corruption issues, retired Police Maj. Gen. Ya'acov Borovski, told the Knesset State Control Committee on Monday morning that the State Comptroller's Office has new evidence "significantly tying Olmert" to improper political appointments made during Olmert's tenure as industry, trade, and labor minister.

In a special hearing on the appointments, Borovski said the evidence suggests "Olmert and the Industry, Trade, and Labor Ministry administration were directly involved in the political appointments in the Small Businesses administration."

"The material arouses suspicions of criminal acts," said Borovski. Borovski told the committee that the classified new evidence and the State Comptroller's annual report have been handed over to the attorney general along with a recommendation to open a criminal investigation into the matter.

Ra'anan Dinur, director-general of the Prime Minister's Office, said Olmert denies being involved in the appointments.

"I asked Olmert if he was involved in the appointments, and he told me that he was not in any way shape or form," said Dinur, who also served as director-general of the Industry, Trade, and Labor Ministry under Olmert. Dinur denied involvement in the appointment of Lilach Nechamia to deputy director-general in charge of special projects in the Small Business Administration. Nechamia was at the time Finance Minister Avraham Hirchson's girlfriend.

"The administrative committee of the [Small Business] administration specifically requested specifically requested such a position be created," said Dinur. "Given the fact that the demands of the Industry, Trade, and Labor Ministry administration regarding budgetary supervision were met, the administration saw no reason to intervene in reasonable and logical administrative decisions."

Committee chairman Esterina Tratman (Yisrael Beiteinu) criticized Olmert for failing to attend the hearing, despite the fact that the date was coordinated with his office two months ago.

"[Olmert] made the wrong decision, and decided not to attend this forum," Tratman said.