An American entrepreneur described to an Israeli court yesterday how he gave wads of cash in envelopes to Ehud Olmert, the Prime Minister, who is now at the centre of a bribery investigation.

Morris Talansky, 75, a businessman and rabbi who was giving his deposition for the prosecution, also spoke of the Prime Minister’s taste for exclusive hotels, expensive watches and first-class air travel.

Mr Talansky insisted, however, that he had received nothing in return for his lavish gifts, even complaining that several “loans” he had made to Mr Olmert had not been repaid.

With tears occasionally welling in his eyes when he was told he might have to delay his return to the United States, Mr Talansky, who had tried to set up a hotel mini-bar business using Mr Olmert’s contacts, said he had believed that his donations would cover expenses for the Prime Minister, whose political stance he professed to admire deeply.

The Israeli Attorney-General wants to prosecute Mr Olmert on bribery charges but has to establish that Mr Talansky “or his business associates” actually received payback for the donations, which Mr Talansky said amounted to $150,000 (£75,000). The prosecution has said in the past that the actual sum could be as much as $500,000. Mr Olmert denies any wrongdoing and has promised to step down if indicted.

Mr Talansky told the court: “I never expected anything personally. I never had any personal benefits from this relationship whatsoever.” He added that he had given the donations in envelopes stuffed with cash to an associate of Mr Olmert.

Even if the prosecution fails to establish a link that could convict Mr Olmert of receiving bribes, the Prime Minister may yet be charged with illegally sidestepping strict rules on campaign financing.

In any case the new revelations, coming on the heels of several other corruption inquiries, are likely to hurt the Kadima party leader’s public standing, which has already taken knocks from his poor performance over the war in 2006 in Lebanon against Hezbollah and his failure, so far, to secure any visible signs of progress in negotiations with the Palestinian leadership.

Mr Talansky’s testimony painted a picture of a politician enjoying the high life and often relying on the Jewish multimillionaire to help him out when he overspent, an image unlikely to endear the Prime Minister to the Israeli public. Mr Talansky said that he had lent Mr Olmert as much as $30,000 for a family holiday in Italy in 2004, money he promised to repay.

“Famous last words,” said Mr Talansky, who also received a phone call from Mr Olmert in 2004 asking him to foot a $4,700 bill that the politician had run up during a three-day stay at the Ritz Carlton hotel in Washington.

Mr Olmert explained that he had “maxed out” his own credit card. “He asked if he could borrow my card and he said it was part of a loan.” Mr Talansky said. He also paid for upgrades to first class when Mr Olmert was flying.

Mr Talansky said that he was aware of his friend’s taste for luxury. “I only know that he loved expensive cigars. I know he loved pens, watches. I found it strange,” he told the court.

Much of the money was raised by Mr Talansky at political gatherings in support of Mr Olmert. It was destined to fund his campaigns for leadership of the right-wing Likud party, of which he was then a senior member, and also when he was running for mayor in Jerusalem.

Some donors would leave the cash in envelopes at the end of fundraising meetings. But Mr Talansky insisted that his motivation was admiration for Mr Olmert, whom he described as articulate and intelligent, and a desire to see him lead Israel.

“I felt that he would be a leader that I would have hoped to be if I had the talent,” he said, explaining that he had kept no formal records of the amounts of money handed over, which were usually between $5,000 and $15,000 at a time.

The cash was handed over in Israel or in hotel suites during visits that Mr Olmert made to New York before becoming Prime Minister in 2006, after his predecessor, Ariel Sharon, suffered a debilitating stroke.

“I had a very close relationship with him but I wish to add at this time that the relationship of 15 years was purely of admiration,” Mr Talansky said. The deposition was taken before any official suit has been filed, as a special measure, since Mr Talansky lives in the United States.

A life in politics

— Ehud Olmert was born in Binyamina in 1945 to parents in the Irgun, a militant group that fought for the establishment of Israel

— He served in the Israel Defence Forces until election to the Knesset in 1973, its youngest member at 28

— As Mayor of Jerusalem between 1993 and 2003, he invested in the city’s infrastructure and backed the expansion of West Bank settlements

— Rose to prominence under Ariel Sharon. Support for the former Prime Minister’s Gaza evacuation process earned him the post of Deputy Prime Minister in 2003.

— Caused uproar by suggesting Israel should pull out of the West Bank and Gaza Strip

— Replaced his long-term rival Benjamin Netanyahu as Finance Minister in 2005, when the latter stood down in protest at the Gaza pullout plan

— Mr Olmert followed Mr Sharon in leaving the right-wing Likud party to found the centrist Kadima party in 2005

— Became leader of the Kadima party after Sharon was struck down by a stroke in January 2006, and was confirmed as Prime Minister in May that year