Let's summarize the basic facts and relevant legal issues in the latest Olmert affair.

At about 11:00 PM (Israel time), the police and the Justice Ministry issued a statement. (As always, read the original.) It's mostly technical stuff about the gag order but the key paragraph is this:

החקירה עוסקת בחשד לקבלת כספים שלא כדין, על-ידי מר אולמרט, במסגרת כהונתו הציבורית כשר התמ"ת וכראש עיריית ירושלים. על-פי החשד, התקבלו על-ידי מר אולמרט כספים בסכומים משמעותיים, מגורם או מגורמי חוץ, לאורך תקופה ממושכת, חלקם במישרין וחלקם בעקיפין

Briefly, Olmert is suspected of accepting money illegally from foreign sources over a long period of time. The word "bribes" is not used but the media have been using the word freely. Uri HaCohen Aharonov of Channel 1 claims that a senior police source told him explicitly that Olmert accepted envelopes filled with cash.

The police have gotten testimony from at least four sources. One is Moshe Talansky of Woodmere, who raised money on behalf of Olmert and many other organizations. Another is Olmert's trusted assistant of thirty years, Shula Zaken, who, unfortunately for Olmert, is known for keeping meticulous records. A third is Olmert's old law partner, with whom he has had an ongoing shady relationship and who is involved in all the open police files on Olmert, Uri Messer. The fourth is an unnamed senior politician associated with Kadima ("Deep Throat"), variously rumored to be Avraham Hirschson (because he has good reason to sing) or Shimon Peres (because you can't have a conspiracy without him). In addition, a number of Haredi makhers, who "did business" with Olmert have been questioned.

In his carefully prepared statement tonight, Olmert said a number of important things:

1. He admitted that he received money from Talansky but claimed they were campaign contributions. Olmert agrees that Talansky was passing on funds from others. (A key question is the identities of the donors and what interests they may have had.) Note carefully that he said that he didn't accept bribes and he didn't put money in his pocket. He did not say that he didn't break the law. He couldn't say this because, even if his story is true, he violated any number of campaign funding laws.

2. He said that the technical matters involving the campaign funds were dealt with by Uri Messer. In short, he threw his old friend Messer to the wolves. I can only assume that Messer has already done the same or will shortly. There is the matter of privileged information here, since presumably Olmert can argue that Messer was acting as his attorney.

3. Olmert admitted to receiving money from Talansky even after the last campaign in which Talansky was involved (Olmert's run for leadership of Likud against Sharon in 2002). Olmert's spin was that this was to pay off debts incurred in the campaign. Note that the older bribery investigations against Olmert revolve around payments made in 2003 and 2004, so the chronology is beginning to make more sense.

4. Olmert said that if indicted, he will resign. Note that he did not say he would suspend himself temporarily. This has crucial political consequences, as I'll explain.

To put matters simply, since Olmert all but admitted to violating campaign funding laws (and since just about everybody understands he's guilty of much worse than that), he is toast.

Legally, how does this play out?

According to Basic Law: The Government, a Minister or Deputy Minister, other than the Prime Minister, must resign if he has been convicted of a crime with turpitude and has exhausted all appeals. In the case of Deputy Minister Rafael Pinchasi of Shas, the Court ruled that he could not continue to serve as a Deputy Minister after he was indicted and before he even stood trial. Since the law quite explicitly says one thing and the court said another (this possibility is a special feature of the Israeli legal system), it is hard to know what is actually supposed to happen in future cases.

In any case, with regard to the Prime Minister, the law is that even a final conviction with turpitude is insufficient to force resignation; the Knesset then needs to vote no confidence in the Prime Minister. This is to preserve separation of powers; ultimately only the Knesset can bring down a Prime Minister, not the courts. Thus the Pinchasi ruling is inapplicable here (despite the unfounded contrary claim on Channel 1 tonight by a certain clueless law school dean, who makes a habit of sucking up to the Court). In short, if Olmert is brought down by the Attorney General or by the Court, it would be a tragedy; if the Court properly keeps its nose out of this and the Knesset fails to bring him down, it would be a farce.

So what are the possible scenarios?

1. Olmert declares -- or the Attorney General rules -- that Olmert is temporarily incapacitated ("nivtzarut zmanit"). Then the official substitute Prime Minister, Tzippi Livni, takes over automatically for a period of up to 100 days. Once 100 days have passed, it is as if the Prime Minister has resigned.

2. Olmert resigns or is incapacitated for 100 days. Then the President offers the Knesset Member most likely to be able to form a coalition of 61 MKs the opportunity to do so. If he or she fails to do so, and an alternate candidate also fails, we go to elections.

3. The Knesset disperses itself. Then elections are held within 90 days.

Note the crucial distinction between the PM suspending himself or being ruled temporarily incapacitated and the PM resigning. In the first case, Livni gets a free 100 days to establish herself as PM before having to either pull together a coalition or face elections. In the latter case, she doesn't get the 100 days. So Olmert's promise that he'd resign following an indictment has some significance.

The next big explosion will be when the identity of Deep Throat is revealed.