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Shula Zaken, who served as former prime minister Ehud Olmert's bureau chief, was a "critical nexus" in the Holyland bribery case, police investigators said yesterday.

Zaken was arrested yesterday at Ben-Gurion Airport - minutes after the arrival of her flight from Los Angeles, where she had been on vacation, and two and a half weeks after the major bribery and fraud investigation became public knowledge.

The Rishon Letzion Magistrate's Court remanded her into custody for seven days yesterday evening.

Zaken is suspected of various offenses, including receiving bribes, mediating bribes, disrupting the investigation, fraud and breach of trust.

Investigators suspect that Zaken took bribes for years, in the form of both cash and other benefits, for both herself and Olmert. Since 2003, she has also allegedly worked to hide the receipt of these bribes, allegedly paid by real estate developers, by including attorney Uri Messer, Olmert's former partner and confidant, in the scheme.

Messer is suspected of receiving bribes on Olmert's behalf from real estate developers whom Zaken sent to him.

Police contend that because of her role as Olmert's office manager during his terms as mayor of Jerusalem, finance minister, industry and trade minister, vice prime minister and ultimately prime minister, she had a "significant and decisive influence" on everything that went on, both at the municipality and at the Industry and Trade Ministry.

The real estate developers who paid the bribes were guaranteed an "open door" to Olmert through Zaken, police say, and they suspect that bribes were paid to her directly in return for this assistance, or for securing the assistance of others involved in the case. Police also believe that Zaken transferred large sums of money to Olmert over the years in exchange for his aid in promoting the Holyland development project and other projects.

Responding to the news of Zaken's arrest, a source close to Olmert said, "Olmert has already stated clearly that he never took bribes, either directly or indirectly, and nothing has changed this fact."

As of yesterday evening, the source added, police had yet to even question the former prime minister about the Holyland case.

But police did mention Olmert by name yesterday for the first time since the investigation went public, during the hearing on Zaken's remand. Police investigators gave the court details of the network by which cash was allegedly transferred from developers to Zaken, Messer and the former prime minister.

Investigators termed Zaken's arrest a significant step toward tightening the noose around Olmert.

Nevertheless, a source well-versed in the details of the case said that the police are still far from having a solid case against Olmert.

The state witness

Much of the case revolves around a state witness whose identity is still barred from publication by a gag order. This witness claims to have served as a conduit for the transfer of bribes to Olmert, and further says that he gave the money intended for Olmert to Zaken.

A source close to Olmert said yesterday that "this or that meeting between Olmert and the state witness does not suggest a thing ... The witness is dubious, and he will be crushed on the witness stand. The police do not have, and cannot have, even an iota of evidence that Olmert received a single shekel illegally."

Police believe that in 2003, Zaken diverted the flow of bribes to Messer, who would allegedly receive the money and issue receipts for "legal advice" and then channel the money to Olmert, while keeping a cut for himself.

But prior to 2003, investigators say, Zaken received the money directly from the state witness, whom she met with personally on Olmert's behalf.

Zaken is thus also suspected of violating the law against money laundering.

The chief of the investigating team, Lior Reis, told the court during Zaken's remand hearing yesterday that this sort of bribery was used to advance the Holyland, Manara Cliff and Ayalon Park projects.

With regard to the Holyland project in Jerusalem, police believe that Zaken and Olmert were involved in expanding the scope of the project by altering the property's zoning classification, thereby enabling the legal limits on construction to be vastly increased. This increased the number of apartments the project could contain, which obviously increased the value of the property and the revenues of those involved.

At the remand hearing, Zaken's attorney, Micha Pettman, said his client's arrest "was extremely hasty." He also said his client had nothing to do with the offenses of which she is suspected, and that she was not in any way at odds with Olmert.

The attorney added that his client would like to confront the state witness before investigators, since he is the person on whom the whole case is based.

"She is ready to confront the witness and be tested with a polygraph machine," Pettman said. "As for whether the witness is telling the truth, test him with the polygraph machine."