A new corruption scandal is dogging Israel's embattled Prime Minister Ehud Olmert. As Robert Berger reports from VOA's Jerusalem bureau, it could distract him from efforts to revive the peace process with the Palestinians.

Ehud Olmert looks on during cabinet meeting, 25 Sep 2007

Israeli police are opening a criminal investigation into Prime Minister Ehud Olmert's purchase of a home in Jerusalem. The attorney general suspects bribery and fraud because Mr. Olmert bought the house at far below the market value.

According to an investigation by the state comptroller, Mr. Olmert received a discount of more than $300,000 in exchange for helping a developer obtain construction permits from Jerusalem authorities. This allegedly occurred when he was a Cabinet minister in 2004.

In a statement, Mr. Olmert denied any wrongdoing and insisted that the price he paid was fair.

Right-wing opposition leaders are calling for the prime minister to resign. But Michael Partem of the Movement for Quality Government says he is innocent until proven guilty.

"The investigation is not an indictment. It is only an investigation," he noted. "So until there is a decision as to whether or not to indict the Prime Minister, we would not be calling on him to step down."

The scandal is another blow to Mr. Olmert whose popularity has plunged since an official inquiry described his handling of last year's Lebanon War as a failure.

The prime minister is also trying to advance peace talks with the Palestinians. Mr. Olmert and Palestinian President Mahmoud Abbas are working on a document on Palestinian statehood to be presented at an international peace conference planned for November in the United States.

Partem says the investigation is bound to be a distraction from the prime minister's official duties.

"It is certainly not healthy, and this is obviously not within his purview of the job," he said. "And it is wasting his time and it is wasting our resources."

It is the latest in a series of scandals involving government officials. The justice minister stepped down in a sex scandal, the finance minister resigned amid charges of embezzlement and Mr. Olmert is facing separate allegations of influence peddling. The scandals have eroded public confidence in the government.