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Former prime minister Ehud Olmert was offered several apartments in a prestigious residential project, a businessman involved in the Holyland affair told police. Olmert was questioned about this earlier this year when the businessman turned state's witness, sources close to the investigation told Haaretz.

Olmert's associates yesterday called these allegations "wacky and groundless." They said the police appear to have no evidence to corroborate the state witness' testimony.

In 2004, the state's witness, whose name is banned from publication, represented the Hazera company and Jerusalem entrepreneur Avigdor Kelner, real estate developers planning to build thousands of housing units in Ayalon Park.

The witness, whose job was to persuade government officials to promote the development project, hired Olmert's confidant, attorney Uri Messer, and paid him a commission.

Now it transpires the witness told police he had promised Olmert apartments in the future project as part of his efforts to promote it.

Olmert supported the project as industry and trade minister and as the official in charge of the Israel Lands Administration, but denied the witness' allegations.

The state's witness told the National Fraud Squad he had been asked for donations to finance one of Olmert's political campaigns. He said he had given Olmert's people no less than NIS 200,000, which he allegedly received from entrepreneur Hillel Charney, who was arrested in the course of the Holyland affair investigation.

Olmert's associates said he knew nothing of such a donation, if indeed it was made.

Olmert was also grilled about checks the state's witness had allegedly given the former prime minister's bureau chief, Shula Zaken. Police suspect Zaken cashed the checks, to the tune of tens of thousands of shekels, depositing the sums in bank accounts belonging to her relatives.

Zaken said in her interrogation that she did not remember receiving money from the state's witness. If she did, she said, it was probably to cover a debt in one of Olmert's political campaigns, and in that case she had given the money to Messer.

Messer, when questioned about this, denied receiving cash from Zaken for covering such a debt. Olmert also said he did not know what money the police were talking about.

The police asked Olmert about the possible conflict of interest in his advancing projects of his close associate Messer's clients, such as the Hazera company. Olmert, instead of answering, told them of another case of conflict of interests, involving Police Commissioner Dudi Cohen, which was much worse.

Olmert was apparently referring to the last state comptroller's report, which found that Cohen had been involved in promoting his brother in the police.

Olmert also reportedly complained to the detectives about the leaks from the investigation and about their relying on a false witness. He accused them of causing Messer's mental deterioration.

Sources close to Olmert, who confirmed these details, said Olmert denies any connection to the Holyland affair and believes he will be found to be completely innocence.

"According to the questions he was asked, police have no evidence against him and [what they have] is mainly promises the state's witness allegedly made to Olmert," one of his confidants said.