The report in the Yediot Ahronot daily - which gave no further details - was the first indication of what Olmert might have given in return for the hundreds of thousands of dollars he allegedly received illicitly from Jewish American businessman Morris Talansky.

The investigation, the fifth into Olmert's conduct since he became prime minister two years ago, has raised doubts about his ability to conclude a peace deal with the Palestinians and provoked widespread speculation about his ability to remain in office.

On Monday, police raided Jerusalem's City Hall on Monday, searching offices and confiscating documents related to the probe, which spans Olmert's tenure as Jerusalem mayor from 1993 to 2003 and subsequent two years as Israel's minister of industry and trade.

Olmert has denied any wrongdoing, and Talansky has insisted that all of his actions on behalf of Olmert were legal.

On Tuesday, Talansky's lawyer, Jacques Chen, dismissed the suspicions raised in the Yediot Ahronot report.

"He never asked (Olmert) for anything and doesn't know anything about it," Chen told The Associated Press. "He has no connection to this."

Police would not comment on the Yediot Ahronot report.

The probe has cast a pall over Israel's 60th anniversary celebrations and embarrassed the prime minister at a time when he had expected to savor U.S. President George W. Bush's second visit to Israel in just four months.

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