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The State Prosecutor's office on Sunday rejected a request from lawyers for Jewish American businessman Morris Talansky - the key witness in the graft probe against Prime Minister Ehud Olmert - to have his testimony in Israel continue in a closed courtroom and under a gag order.

Talansky, who is suspected of making illicit cash transfers to Olmert, testified in May 2008 that he had transferred Olmert some $150,000 over 15 years, and that Olmert had tried to aid a Talansky business venture by introducing him to several American billionaires.

Uri Korev, an attorney for the Jerusalem District Prosecutor's office on Sunday notified Talansky's lawyer Jack Chen that he will consider allowing parts of Talansky's testimony to take place behind closed doors, in light of his fears that his words will be manipulated or taken out of context.

Korev also reiterated that the State Prosecutor will not use Talansky's testimony to prosecute him in Israel, nor will they restrict him or his movement in Israel.