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The State Prosecutor on Monday spent hours trying to convince the presiding judge to remove American-Jewish businessman Morris (Moshe) Talansky's status as "key witness" in an ongoing corruption case against former prime minister Ehud Olmert due to his contradictory testimony.

Talansky is currently at the center of one of a series of criminal investigations into Olmert, who allegedly received hundreds of thousands of dollars from the businessman over many years. Olmert is suspected of receiving financial favors from Talansky in exchange for assisting him with business ventures.

Talansky's lawyers last month requested clarification as to whether their client was considered a suspect or a witness in the Olmert affair.

At the start of Monday's proceedings at the Tel Aviv District Court, the American businessman confessed that his testimony incriminating Olmert's former bureau chief, Shula Zaken, in the "cash envelopes" affair may actually have been coerced during investigation, rather than based on actual recollection.

Talansky admitted Zaken's attorneys that he was not entirely sure that Zaken had in fact transferred an envelope containing $72,000 to the ex-premier, as he claimed in his initial testimony.

State Prosecutor Moshe Lador said during the proceedings that as this confession countered the testimony given both in court and to police, it was necessary to avoid formally calling Talansky a central witness.

In response, defense attorneys told Lador that if he did not want to consider Talansky a witness, he should simply not cross-examine him and turn him into a "hostile witness".

The justices eventually permitted Lador to question Talansky, but told him he must not examine him as a "central witness" without officially proclaiming him as such.

Talansky recently returned from the U.S. to further his testimony in the case, which he did for six hours on Sunday. Olmert's attorneys argued on Monday that prosecution knew from the beginning that Talansky's testimony was "tainted" and consistently "contradictory."

Meanwhile, Zaken's attorneys were informed on Monday that she would stand trial in another corruption probe concerting the Tax Authority. She will be charged with fraud and breach of trust. The former chief of the Tax Authority, Jacky Matza, will also be tried in the case.