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The American witness in the "cash envelopes" affair for which former prime minister Ehud Olmert is under investigation, arrived in Israel on Wednesday.

Morris Talansky, the United States businessman who says that he gave Olmert large amounts of money in cash-filled envelopes is to continue his testimony and cross-examination by Olmert's lawyers in the Jerusalem District Court on Sunday and Monday.

Talanky was questioned in 2008 for giving Olmert $150,000 in cash over a 15-year period when Olmert was mayor of Jerusalem and minister of trade, industry and labor.

Olmert allegedly used the money to finance his election campaign for the Likud chairmanship as well as to pay for hotel stays and flight upgrades, among other things.

Talansky also said that more than $300,000 was transfered from his account to cover the debts of United Jerusalem, the municipal list under which Olmert ran for mayor.

Talansky postponed his return to Israel to testify, originally scheduled for last August, after his statements here led to the initiation of a criminal investigation against him in the United States.

Talansky agreed to return to Israel after obtaining, through protracted negotiations between the Israeli and American authorities, limited immunity from prosecution in the U.S.

The court ordered the state to give the defense team access to transcripts of the prosecution's meetings with Talansky's attorneys, partly in order to enable the latter to determine whether Talansky has been offered anything in exchange for his testimony.

In March Mazuz informed Olmert that he intended to indict the former prime minister in connection to the case on charges of fraud and breach of trust. The bribery charges are not included in the draft indictment.