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Following the first day of the cross examination of Jewish American businessman Morris Talansky, a key witness in the corruption investigation currently underway against Prime Minister Ehud Olmert, the premier's lawyers concluded that Talansky was maintaining a secret quid pro quo relationship with the prosecution.

The cross-examination begam Thursday at the Jerusalem District Court and was expected to continue for four additional days. The case investigating suspicions that Olmert had illicitly received funds from Talansky over the course of 15 years has been dubbed the "cash envelopes" affair.

Olmert's attorney, Eli Zohar, grilled Talansky in an effort to impugn the credibility of the deposition Talansky had given to the prosecution in May and undermine his credibility as a witness by pointing out what they suggested were Talansky's frequent, unfounded lawsuits and an untoward attempt to secure a fat severance package from a Jerusalem hospital.

Attorney Nevot Tel-Tzur of Olmert's defense team said at the close of the first day that the defense team was satisfied with the outcome of the cross examination at this stage.

"Talansky is offering and then rescinding his versions of the events too easily. He is maintaining a secret relationship with the prosecution - it was decided to present him as a witness who received no status or promises, but he has received a clear message during secret meetings that though he is formally considered a suspect, he would not be charged with any crime, and thus they are misleading the public," Tel-Tzur said.

According to the defense team, what emerged from Thursday's cross examination was a "sad, complicated or shocking picture" of the way the prosecution was handling the investigation against their client and the way their central witness (Talansky) was being presented.

"I pledge that at the end of the cross examination the public will have a different view of the affair. It won't be the same picture the public has been living with over the last month," Tel-Tzur added.

In the cross examination, Talansky also told the premier's defense team that he had not lied in his deposition before the prosecution in May.

Zohar asked Talansky whether the statements he made to prosecutors were figments of his imagination. Talansky replied that he did not believe he concocted any stories.

Zohar then asked whether Talansky's answers to questions posed by police were aimed at appeasing investigators. Talansky said in response that he understood that investigators sought to draw specific statements from him and to lead him to confirm what it was the investigators wanted him to confirm. The U.S. businessman told Olmert's attorney that he often declined to answer investigators' questions whenever he felt he was being cornered into giving a certain answer that he felt was inconsistent with the truth.

Zohar tried to coax Talansky into acknowledging that some of the statements he gave in his deposition were not entirely accurate. Talansky said he never lied to prosecutors, and that he described the events exactly as they happened. Talansky then told Zohar that some of the facts he relayed to prosecutors were inaccurate, and that he was suffering from fatigue and excitement from all the commotion. Investigators' questions also confused him, Talansky told Zohar.

Zohar then showed Talansky a transcript of a conversation the businessman had with State Prosecutor Moshe Lador, during which Lador told Talansky that it was the duty of prosecutors to gather information about alleged wrongdoing, and that the individual they were focusing on was Olmert.

Zohar asked Talansky if it was made clear to him at one point that he is not a suspect in the case. He presented him with an excerpt from his questioning by police in which Talansky explicitly said he knew for certain he was not a target of the investigation. Zohar told Talansky that it was his understanding that the state prosecutor told Talansky that no charges would be brought against him if he provided investigators with damning testimony against Olmert. Talansky replied that this was an inaccurate conclusion, and that prosecutors never told him whether he was in danger of being charged with a crime.

Zohar pressed Talansky further, asking whether his attorney, Jacques Chen, had requested a formal, written statement from prosecutors declaring that Talansky was not a suspect so that he could continue cooperating with the police. Talansky said this was not relevant, and that he had cooperated in any event. Talansky told Zohar he wanted to know where he stood.

Olmert's attorneys then showed Talansky a copy of the protocol of a meeting he held with prosecutors. They asked Talansky whether he expected to extract a promise from prosecutors that they did not consider him a suspect. Lador claims that the protocol from that same meeting does not accurately reflect everything that was discussed since there were segments of the conversation which were held in Hebrew and that Talansky was not a party to. Therefore, it would be incorrect to present the protocol as if Talansky were involved in that conversation.

At the end of his meeting with Lador and the Jerusalem District Attorney, Eli Abarbanel, Talansky was asked whether he inferred from the meeting that he was now required to make an effort to remember as many details as he could that may incriminate Olmert, and that divulging that information to investigators would finally enable him to return home to the United States. Talansky denied this was so, telling Olmert's lawyers that he has never raised the topic in conversations with his attorneys or prosecutors.

At a later stage in the cross-examination, Zohar pointed out to Talansky an excerpt of his statements to investigators in which he says they led him to believe Olmert made improper use of the money that Talansky gave him. Zohar asked Talansky how prosecutors left him with the impression that Olmert used the money from Talansky for his own personal use. Talansky said the tone and wording of the prosecutors' questions led him to believe Olmert used the cash for other purposes.

The cross-examination is expected to last the course of five days.

"I feel a sense of honor and truth," Talansky told reporters as he prepared for the cross-examination.

Lawyers for Olmert and his former bureau chief, Zaken, planned to screen parts of Talansky's police interrogation that show that he repeatedly changed his versions of the same events. They were expected to confront him with details given to the police by Olmert's former law-firm partner, Uri Messer, to undermine Talansky's credibility as the key witness in the case. The lawyers argue that the police and prosecution tailor-made Talansky's story.

Olmert's defense team had trouble Wednesday concealing rifts among its members. After several tense days of verbal sparring between Olmert's attorneys, Prof. Ron Shapira announced his resignation from the case.

On Sunday, Yedioth Ahronoth reported that during a meeting between Olmert and his lawyers to prepare for his third police interrogation, Shapira had suggested putting together a plea bargain with the State Prosecutor's Office. Shapira expressed concern at the meeting that if an indictment is filed against Olmert he would receive a prison sentence.

He therefore proposed to the prime minister and his colleagues that a "package deal" be presented to the prosecution: Olmert would plead guilty to relatively minor offenses such as fraud and breach of trust, and would resign from his post immediately. Attorneys Eli Zohar and Navot Telzur were opposed to the suggestion. The newspaper report did not mention attorney Roi Blecher's position.

It turns out that at that same meeting, which took place on the day before the double-billing affair dubbed "Olmertours" broke, his four lawyers were not in agreement regarding Olmert's chances of surviving the envelopes case, and argued over what strategy to employ.

After news of the latest investigation, in which Olmert is suspected of billing multiple public associations for overseas trips and pocketing the surplus for his family's use, his lawyers tried to maintain a facade of business-as-usual, even waging aggressive defense tactics in the media.

Telzur and Shapira were dispatched to give interviews to every outlet, but their comments clearly lacked coordination. Telzur claimed that funding had indeed been requested from several nonprofit organizations at once but that he was not at all sure if any remaining surplus was rolled over from one trip to another. Shapira claimed that all the details in this case were open, and that the surplus was most definitely rolled over.

But whereas Shapira rushed to Olmert's defense in the media, his real position was leaked to Yedioth Ahronoth. Olmert's media adviser, Amir Dan, was quick to deny the details reported, but the public damage was already done.

Bad blood spread between the members of the team. It was decided that Shapira would not question Talansky under cross-examination. In the division of labor among the lawyers, Shapira had been placed in charge of the material that arrived from their private investigators in the Untied States. The sleuths had been working for weeks to find dirt on Talansky, and the lawyers agreed not to publicize their discoveries in order to preserve the element of surprise.

But once again someone broke ranks and gave some of the details to the press. Information published in the past two days includes allegations of irregular financial movements in Talansky's bank accounts, and accusations regarding threats against his business partners.

This was, apparently, the last straw as far as Shapira was concerned. He had had enough and decided to quit the case. The remaining members of Olmert's defense team undoubtedly had to work hard Wednesday to bone up on Shapira's part in the cross-examination.