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Prime Minister Ehud Olmert, during his term as trade and industry minister, was directly involved in obtaining millions of shekels in state funds for a political crony a few years ago, according to a State Comptroller's Office report released yesterday.

State Comptroller Micha Lindenstrauss blasted the Trade and Industry Ministry's Investment Center for approving, in violation of the law, grants to Likud activist Rahamim Ben Shushan, beginning in the mid-1990s. The period also includes years from before Olmert was minister.

Olmert was a Likud member before joining Kadima, when it was formed at the end of 2005. The comptroller's report found Olmert saw to it that Ben Shushan received funds with the help of Oved Yekezkel, the minister's senior advisor, and Ra'anan Dinur, now director general of the Prime Minister's Office.

Ben Shushan received grants amounting to NIS 7.67 million, in contravention of the Law on Encouragement of Capital Investment as well ministry norms, but used only NIS 2.326 million of that amount, the report says.

Olmert's involvement is documented in internal ministry correspondence. In June 2004, Ben Shushan submitted a grant request to start a mushroom processing plant. The ministry rejected the request and referred Ben Shushan to the Agriculture Ministry, which handles such grants.

Ben Shushan complained to Olmert that he was being discriminated against, citing a mushroom farm in Arad whose request for a grant was approved by the ministry. Three days after he sent the complaint to Olmert he received a letter from Dinur's office in Yehezkel's handwriting, saying "Urgent: Ehud has requested a personal examination [of your case] and that he be updated." Dinur was then acting manager of the ministry's Investment Center, which handles grant awards.

In October of that year Olmert's advisor sent out an e-mail detailing a phone message Ben Shushan had left for Yehezkel. "It was agreed that he would submit a request for mushrooms. He did so. Suddenly there is no money and they stopped his survey... he said that his friendship with Ehud notwithstanding... he was shocked by the proceedings." Further down the message said, "Ehud gave instructions. What's going on?"

Since the entrepreneur was in direct contact with the minister's aides and cited his closeness to the minister, the acting director of the Investment Center could have interpreted Olmert's request for a "personal examination" as an instruction to give the entrepreneur preferential treatment, the comptroller wrote.

In response to the comptroller's queries, Ben Shushan said he never called Olmert a "friend." Olmert and Yehezkel insisted the minister's request to be updated was in line with his routine responsibilities.

During Olmert's term as trade and industry minister, the ministry approved two of Ben Shushan's requests for grants to expand the Teva Post plant he owned. The size of the grants exceeded the sums permitted by law and the Investment Center's procedures.

In December 2002, the company requested another grant, this time of NIS 2.99 million. This too was approved, after a discussion in Olmert's bureau the following July (Olmert became minister of industry and trade in February 2003). The comptroller said the approval was not made by the authorized body and was granted despite the fact the company did not meet required criteria.

Three months after the five-year permit to set up the plant expired, in 2004, the company requested an additional NIS 1.99 million grant, which was also approved. The comptroller said the approval was unauthorized.

The comptroller said Yehezkel's special treatment of the Ben Shushan case contravened procedures that are in place to ensure a separation of roles between politicians and professionals in government ministries.