May 8 (Reuters) - Israeli Prime Minister Ehud Olmert admitted on Thursday that he took cash from an American businessman but refused to resign over a police investigation into hundreds of thousands of dollars of alleged bribes.

Minutes earlier, Israeli police issued a statement saying:

"The Shalom court has just permitted the release of the gag order on the investigation involving the Prime Minister Ehud Olmert.

"Approximately 10 days ago the attorney general permitted the opening of the new investigation involving the Prime Minister as well as other individuals. The investigation deals with suspicions that the prime minister received sums of money unlawfully during the period when he was holding a public position before he became Prime Minister. It is suspected that the Prime Minister received significant sums of money from a foreigner or number of foreign individuals over an extended period of time partly directly and partly indirectly. One of the central witnesses in the case is a foreign resident and a citizen who came to Israel for a visit over the Passover holidays and his testimony was taken during this time. The witness involved was brought in for questioning after his alleged involvement in transferring the money. This became known from the materials that the police received during another investigation.

"After a number of testimonies that were taken in this case, Prime Minister Olmert was questioned for an hour on May 2, 2008, regarding these suspicions. During this questioning, the Prime Minister answered all of the questions and denied receiving money unlawfully.

"The reason for which the attorney general allowed Prime Minister Olmert to give testimony urgently was due to the fact that it was necessary for the investigation. Nonetheless, due to the Prime Minister's busy schedule, Olmert was asked at this initial stage to give one hour of his time for the investigation, but it was made clear that the investigation would continue on another date.

"Until now a number of testimonies have been taken aside from the Prime Minister's including Ms. Shula Zaken, the Bureau Chief of the Prime Minister, and from Advocate Uri Messer. The investigation is ongoing and it will continue as long as necessary.

"Since one of the central witnesses in this case who gave testimony to the police is a foreign resident and citizen, the State of Israel decided to ask the Jerusalem court to enable to hear his testimony in court as soon as possible. The decision to make this request was permitted as a result of a number of reasons and especially due to the fact that the key witness wishes to return to his home country. Therefore it is believed that if the witness leaves the country it will not be possible to take his testimony during the trial. The decision to collect evidence at this early stage does not mean that there will necessarily be a conviction in this case. The reason for the police's initial request for a gag order on all the details involved in this case was due to the concern that without the gag order there would be a possibility that the investigation would be harmed."

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