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State Comptroller Micha Lindenstrauss has urged Attorney-General Menahem Mazuz to launch a criminal investigation against Prime Minister Ehud Olmert for illicit political appointments the premier allegedly made when he served in his previous position as industry and trade minister, the Justice Ministry said Sunday.
The prime minister has denied any wrongdoing in the case.
The recommendation by the government's top watchdog, which comes days after a public tiff between the two men over the scope of the state comptroller's separate probe into the Lebanon war, was likely to spell more trouble for Olmert less than four months after he took office.
Senior sources in the Prime Minister's Office expressed astonishment at Lindenstrauss's recommendation, which they said came a week after he submitted his report into the matter without recommending a criminal investigation.
"What happened in the interim?" one senior source close to Olmert asked, adding that the Prime Minister's Office did not receive any new requests for new information over the last week. "What caused him to change his mind?" the senior source wondered.
The official said he did not rule out that Lindenstrauss's recommendation was connected to the very public spat he had with Olmert last week over the prime minister's request that the state comptroller investigate the home front's preparedness during the war in Lebanon.
When Lindenstrauss said that the prime minister did not have the authority to tell the state comptroller what to investigate, Olmert's office issued a statement essentially saying that Lindenstrauss did not know what he was talking about, and that under the State Comptroller Law, the comptroller was obligated to prepare an opinion when requested to do so by the government.
By law, the state comptroller's recommendation to open a police investigation must be endorsed by the attorney-general.
Mazuz is expected to decide in the coming weeks whether to open a criminal investigation in the case after the State Attorney's Office decides if there is enough evidence of criminal offenses.
In his letter, the state comptroller wrote the attorney-general that he identifies "suspicions of crimes" in the high-profile case, the Justice Ministry said.
His recommendation reverses an earlier opinion he proffered, which did not include the critical criminal probe of the premier.
State Comptroller spokeswoman Shlomit Lavi declined comment Sunday.
Olmert named four political allies to key jobs in a state-funded agency in his previous position as industry and trade minister, a recent State Comptroller's Report found.
According to the report, Olmert named four cronies from the Likud to key positions in the Small Business Administration, which is not a government agency, but receives state funding.
Olmert's associates said they preferred that the attorney-general investigate the issue and not the state comptroller, who is at loggerheads with the premier over the war probe.
Concomitantly, the state comptroller is also investigating a separate Jerusalem property deal involving the Olmerts.
The Jerusalem property deal dates back to October 2004 when the Olmerts purchased a luxury apartment in the city's upscale German Colony, at what critics contend was below market price in exchange for favors.
The property affair gathered steam after the comptroller reportedly found that Olmert bought the garden apartment for $1.2 million, when the apartment was actually worth between $1.6m. and $1.8m.
Investigative journalist Yoav Yitzhak, who broke the story, asserts that in return for the $400,000 -$600,000 property discount, Olmert's associates worked to help advance the contractor's construction projects in Jerusalem.
The contractor, who completely denied the allegations, has said that he intends to sue Yitzhak for libel.
The state comptroller's spokeswoman said Sunday that the case was still under investigation.
A previous high-profile investigation into the sale of Olmert's former home to a billionaire US tycoon was dropped after the comptroller found that the $2.69m. sale price, which critics had said was above-market, was in fact reasonable.
Last week, Olmert said Lindenstrauss will examine the home front's level of preparedness prior to the war, while the state comptroller responded that any decision he makes on a future war probe does not require the premier's authorization, and that he reports only to the Knesset.
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