Olmert probe highlights legal fog, graft fears

By Rebecca Harrison

JERUSALEM, May 9 (Reuters) - Israel is no stranger to corruption scandals -- as police investigate Prime Minister Ehud Olmert on suspicion of taking bribes, his predecessor's son sits in jail for campaign funding misdeeds on his father's behalf.

Olmert has denied any wrongdoing and challenged prosecutors by saying he will resign only if they produce evidence to indict him. Legal and political experts said that, whatever happens, the probe highlights confusion over political finance rules and worries that Israeli democracy is under threat from corruption.

At the Movement for Quality Government (MQG), an Israeli lobby group, Daniel Kayros said on Friday it was too early to comment on Olmert's case but his organisation was concerned that senior figures had not been held to account in the past.

"In general, we are dealing with acute corruption," he said. "We need to see the law being enforced in high-level places."

Olmert admitted on Thursday to taking cash from an American businessman to fund personal election campaigns over a decade. Judicial sources say prosecutors believe the sums involved totalled hundreds of thousands of dollars.

Lawyers say Israeli politicians must declare all donations and adhere to strict limits on the amounts they can accept -- as little as 500 shekels ($144) per family.

Police have not outlined what charges they might consider in Olmert's case but only that they suspect he "received sums of money unlawfully".

In the case of Omri Sharon, a member of parliament jailed this year, prosecutors' case rested on the fact he failed to declare campaign donations. They did not prove any corrupt granting of favours on the part of him or his father, then prime minister Ariel Sharon who now lies in a long-term coma.