Latest scandal could topple Olmert

He had reason to worry. Israeli Prime Minister Ehud Olmert, his partner in pursuing peace with the Palestinians, is the unpopular and vulnerable leader of a fractious coalition.

"Israeli politics is like karate," Bush observed, according to participants at the private dinner. "You never know when the next chop will come."

As Bush returns to Israel today, Olmert's job looks less secure than ever. The latest blow is a corruption scandal that broke last week and threatens to paralyze a U.S.-backed peace process that is already limping.

Israel's police fraud unit has raided government offices, seized files and interviewed Olmert and dozens of witnesses in a widening probe. The investigation focuses on suspicion that the Israeli leader received hundreds of thousands of dollars in illicit cash from 1993 to 2005 from Morris Talansky, a wealthy New York businessman described by one investigator as "Olmert's ATM."

Olmert, who denies taking bribes and says the money was used for legitimate campaign expenditures, has promised to step down if indicted.

That sets up two scenarios, either of which could frustrate Bush's goal of at least a partial peace agreement by the end of his presidency: If the investigation drags out, Olmert could remain under suspicion for the rest of this year, constrained in his political authority to make peace. If it ends quickly in an indictment, the struggle to succeed him would consume Israel for months, putting peace talks on a back burner.

Olmert is a skilled political survivor who has weathered several other corruption investigations stemming from events before he became prime minister in 2006. He has not been formally charged and rejects the suspicions that he used Cabinet positions and his decade as Jerusalem's mayor to improperly change rules, influence decisions or benefit business and party associates.

The latest inquiry is viewed as more serious. Unlike the others, it involves allegations of envelopes stuffed with cash as well as testimony from the giver and an alleged accomplice, Olmert's legal counsel, concerning transfers.

"It looks like the most flagrant kind of corruption," said Moshe Negby, a prominent legal analyst.