I bankrolled Olmert's taste for the high life, American businessman tells court

Morris Talansky, a US businessman, testified yesterday that he had handed over around $150,000 (£76,000) to Ehud Olmert, now Israeli Prime minister, over 15 years – including multithousand-dollar payments in envelopes stuffed with cash.

But while Mr Talansky, suspected of making illegal payments to Mr Olmert since he first campaigned to become Mayor of Jerusalem, said Mr Olmert had vainly – and voluntarily – tried to help one of his business ventures, he denied that he had asked or expected anything from Mr Olmert for his money.

Mr Talansky, 75, said the money included loans for stays in luxury hotels in the US and one – which he said was never paid back – of $25,000 to $30,000 for a family holiday in Italy. He testified in the Jerusalem district court that there were no records of how the money he transferred was spent, stating: "I only know that he loved expensive cigars. I know he loved pens, watches. I found it strange."

While seriously compounding the embattled Mr Olmert's embarrassment at being the target of yet another police investigation into possible corruption, it was not clear that the evidence given so far by Mr Talansky by itself establishes a case against the Prime Minister for bribery.

Mr Talansky said that on one occasion he used his personal credit card to pay a $4,700 hotel bill for a stay at the Ritz Carlton in Washington in 2004. Mr Olmert had called him to explain that his own credit card had "maxed out". Mr Talansky added: "He asked if he could borrow my card and he said it was part of a loan."

The businessman also said that Mr Olmert had had asked for another loan for a $15,000 hotel bill for a stay at the Regency Hotel in New York in cash rather than by cheque. He added that he walked to a bank four blocks away and withdrew the money. When he handed over the cash to Mr Olmert, he asked to be repaid as soon as possible. "Famous last words," Mr Talansky said, indicating that the loan was never repaid.

He said the cash had been paid either directly or through aides of Mr Olmert, and that some of it had been used to upgrade business class air tickets to first class.

He said the last of the payments, which date back to when Mr Olmert campaigned for the mayoralty of Jerusalem in 1993, had been in response to a request from the then industry minister for $72,500. This was to help in elections in the ruling party Likud, of which Mr Olmert was a leading figure until he joined his predecessor Ariel Sharon in forming Kadima in 2005.

Mr Talansky declared: "I was extremely shocked because it was quite a lot of money. He mentioned he was low on the [Knesset candidates'] list and needed a lot of money and I decided it was a wrap up of the money I was going to give." He said he went to the bank and took out $68,000 or $70,000. He added: "I believe that was the last that I ever gave for any campaign."

Mr Talansky said he believed that most of the money he transferred was for political campaigns but that Mr Olmert had also sought money for holidays and unrecorded personal expenses. Mr Olmert, who has said he will resign if indicted as a result of the investigations, has also said that he never took illegal campaign contributions, never took bribes and "never took a penny for myself".

Mr Talansky said that he had donated $30,000 for an unsuccessful campaign in 2002 for the Likud chairmanship. The money had been donated in four cheques in the name of Mr Talansky, his wife, son and brother after "I recall him telling me you could only give him a maximum amount per person".

He said Mr Olmert had offered to contact three billionaires including Yitzhak Tshuva, owner of the Plaza Hotel, and Sheldon Adelson, to try to interest them in becoming customers for a hotel mini-bar venture run by Mr Talansky. He said the offer had not helped and Mr Adelson, one of the richest men in the US, had slammed down the phone on him. Mr Talansky added: "I'm never going to a politician for business. He wanted to do me a favour and it never worked out."

Mr Talansky said that he greatly admired Mr Olmert as a charismatic politician who always greeted him with a big hug whenever the two men met in Jerusalem, though he had never been to Mr Olmert's home. "I had a very close relationship with him but I wish to add that the relationship of 15 years was purely of admiration."

He added: "I never expected anything personally. I never had any personal benefits from this relationship whatsoever."

Mr Talansky's testimony was not part of any court proceeding against Mr Olmert, who is still under police investigation. It was given in court because Mr Talansky is a US resident and the authorities expressed concern that he might not return to Israel to testify. At one point Mr Talansky, who has spent most of his career as a fundraiser for Jewish causes, broke into tears when he was told the hearing might have to be prolonged beyond yesterday. He said he missed his wife, who he had said was in deteriorating health at the couple's home in Long Island.

Eli Zohar, one of Mr Olmert's lawyers, said Mr Talansky's evidence was "twisted" and that the truth would be revealed at a cross examination the lawyers will conduct on 17 July.

Mr Zohar added: "In general we're saying that we are not talking about any criminal activity whatsoever."

The state attorney, Moshe Lador, said after yesterday's hearing that it was too early to make decisions about how the case would proceed.