Jerusalem - Citing lack of evidence, Israeli police said Thursday they were closing a corruption investigation against outgoing Israeli Prime Minister Ehud Olmert, under which he was alleged to have bought a house at a significant discount in return for extending favours to the contractor.

The premier however faces indictment on three other corruption allegations.

Olmert was suspected of having bought a house in a plush Jerusalem neighbourhood in late 2004 for some 325,000 US dollars below the market price, in return for helping the contractor obtain building permits from the Jerusalem municipality.

Police said Thursday the case would be closed and the findings passed onto Attorney-General Menahem Mazuz.

Responding to the police decision, Olmert's spokesman Amir Dan asked why it had taken three years "to investigate simple claims, only to arrive at the obvious conclusion - that there is nothing to them."

Attorney-General Mazuz announced earlier this month that he is considering indicting Olmert on charges of fraud, breach of public trust and receiving illicit funds from a US businessman, depending on a outcome of a hearing he will offer the premier.

The final decision, however, depends on the outcome of a hearing Mazuz will offer Olmert.

Police recommended several months ago that Olmert be indicted over the affair, known in Israel as "the money envelopes," in which he allegedly accepted hundreds of thousands of dollars, much of it in envelopes stuffed with cash, from Morris Talansky, a US businessman and fundraiser.

Mazuz has already recommended that Olmert be indicted over another affair, in which he is suspected of having multiple-billed travel expenses while serving in public office in the years before he was elected premier in March 2006.

The attorney-general said Olmert accumulated some 85,000 dollars by submitting bills for the same journey more than once to more than one body, including the state.

However, in this case too a final decision depends on the outcome of a hearing he will offer Olmert and his lawyers.

And the outgoing Israeli leader also faces indictment for breach of trust and fraud, stemming from allegations that while trade and industry minister he ensured that a factory endorsed by his former law partner received a generous grant from the ministry's Investment Centre.

Another investigation against Olmert - that, as finance minister in late 2005, he tried to favour two business friends by changing the terms of the tender for the privatization sale of Israel's national Leumi Bank - was closed in late 2006 and did not materialise into an indictment.

The 63-year-old Olmert will likely leave office next week once prime minister-designate Benjamin Netanyahu presents his new government.

Bowing to public pressure, Olmert did not run at the head of his Kadima party in the February 10 elections, and so was not re-elected to the Knesset. (dpa)