Israel's attorney general yesterday ordered police to open a criminal investigation into allegations that Prime Minister Ehud Olmert fraudulently purchased a Jerusalem home well below market value.
The move dealt a blow to the Israeli leader at a time when he has begun to rehabilitate his image following a series of scandals and missteps.
It also came at a sensitive time for Mideast peace efforts. Olmert has been holding talks with Palestinian President Mahmoud Abbas aimed at agreeing on the framework for a future peace deal ahead of a US-sponsored Mideast conference later this year.
Attorney General Meni Mazuz ordered the investigation at the recommendation of the state comptroller, a government watchdog agency that suspects Olmert bought the house from a Jerusalem developer "at a discount," the Justice Ministry said.
In return, Olmert is suspected of helping the developer obtain construction permits from Jerusalem authorities. The ministry said Mazuz will have to weigh evidence gathered by police before deciding whether to indict Olmert.
Olmert, a former mayor of Jerusalem, was a senior government minister at the time of the sale, in late 2004. Israeli media said he paid $1.2 million for the home, which the state comptroller said was about $325,000 below market value.
In a statement, Olmert declared his innocence and insisted the price he paid was fair.
"We are sure the investigation will clearly show that the purchase of the apartment by the Olmert family was made honestly, ethically and for an appropriate price," it said.
"This investigation is uncalled for," it added, while pledging to "cooperate fully" with the investigation.
Olmert has been dogged by corruption allegations throughout his three-decade political career but has never been convicted. He has consistently denied any wrongdoing.