Israeli police said they wanted Prime Minister Ehud Olmert to face criminal charges in a corruption scandal driving him from office during peace talks with the Palestinians.

Issuing a non-binding recommendation, police said they had evidence showing that Mr Olmert illegally received money from a US businessman and made duplicate claims for travel expenses when he served as mayor of Jerusalem and trade and industry minister.

He has denied any wrongdoing in a series of investigations.

A police document said the recommendation included charges of bribery, fraud, money laundering and breach of public trust over funds that "reached hundreds of thousands of dollars".

With Mr Olmert committed to resigning after his Kadima party holds a leadership vote on tomorrow week the recommendation will have no immediate impact on his tenure and does not guarantee an indictment will be filed by Israel's attorney-general.

Mr Olmert's lawyers called the police recommendation "meaningless" because only the attorney-general can decide whether or not to indict a prime minister.

"We will wait patiently for the attorney-general's decision, and as opposed to the police, we have no doubt in our hearts he is well aware of the responsibility he carries," the lawyers said in a statement.

Mr Olmert, who has vowed to pursue US-backed peace talks with the Palestinians, could stay in office for weeks or months while his successor tries to form a new government coalition.

Polls show Israeli Foreign Minister Tzipi Livni as the front-runner in a Kadima leadership race putting her against Transport Minister Shaul Mofaz, a former defence chief.

"It has not been an easy day for the state of Israel. The police recommendation is a recommendation, and the attorney-general needs to make a decision," Mr Mofaz said in an interview on Israel's Channel One television.

Palestinian negotiator Saeb Erekat said of the police recommendation: "This is an internal Israeli matter, but we hope that the internal complexities will not lead to more settlements and incursions."

One case focuses on New York-based fundraiser Morris Talansky who testified in an Israeli court in May he had given Mr Olmert €104,000 in cash-stuffed envelopes over a 15-year period.

The police document said: "The investigation showed that Mr Talansky transferred to Mr Olmert over the years, at least since 1997, significant sums of money, in different ways, some in cash and illegally."

At the same time, Mr Olmert used his position to promote Mr Talansky's businesses, the police said.

The second case deals with allegations that Mr Olmert double billed trips abroad with public institutions, including Israel's Yad Vashem Holocaust memorial, and used the extra money to fund private trips for himself and his family.

The police said they will continue investigating Mr Olmert over allegations he used a former cabinet post to promote a friend's business interests and will soon decide whether to recommend further charges.

Under Israeli law, police submit their recommendation to the prosecution which then files its own legal opinion to Attorney-General Menachem Mazuz, who is the only one authorised to indict a prime minister.

Factbox on possible successors to Olmert

Tzipi Livni: Foreign minister and chief negotiator with the Palestinians, Ms Livni is seen as the likeliest successor from within Olmert's Kadima party, which holds a leadership election on September 17. The most powerful woman in Israel since Prime Minister Golda Meir in the 1970s, Ms Livni, 50, called on Mr Olmert to quit last year after a scathing report on Israel's 2006 war in Lebanon. He didn't. Nor did she. Daughter of a prominent right-wing Zionist, she is a former intelligence agent. Like Mr Olmert and former prime minister Ariel Sharon, she left the right-wing Likud party in 2005 to found Kadima.

Ehud Barak: Defence minister who leads the Labour party, Kadima's main coalition ally. Mr Barak is not a member of Parliament so he could not become prime minister without first winning a seat. A much-decorated commando, top general, and prime minister from 1999-2001, Mr Barak, 66, has called for Kadima to choose a new leader. When he campaigned last year for the Labour leadership, he said Mr Olmert should quit if an inquiry faulted him over the Lebanon war. This year, it did. But Mr Barak said he would call for Mr Olmert to go "at a more convenient time".

Benjamin Netanyahu: Prime Minister from 1996-99 and leader of the opposition Likud party since Mr Sharon, Mr Olmert and others bolted to Kadima. Educated in the US, he became a decorated commando. As finance minister under Mr Sharon from 2003, Mr Netanyahu, 58, pursued economic reforms that angered the left but are credited by many for economic growth. Tops many polls as likely winner if parliamentary election, not due until 2010, is called early.

Haim Ramon: A close Olmert confidant, vice premier Ramon quit the Labour party to join Kadima. He was forced briefly to resign his cabinet post following his conviction for indecent assault against a woman soldier but was allowed to return as a minister by an appeals court. He is one of the government's most active supporters of peace talks with the Palestinians.

Shaul Mofaz: Transport minister and a former armed forces chief and defence minister, Iranian-born Mr Mofaz is known for his tough tactics in crushing a Palestinian uprising that erupted after peace talks failed in 2000. (Reuters)

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