By Ori Lewis
JERUSALEM (Reuters) - Lawyers for Foreign Minister Avigdor Lieberman faced a hearing on Tuesday where they argued against his being indicted on graft charges that would force his resignation and could trigger early Israeli elections.
Justice officials announced last April that Lieberman, an outspoken rightwinger who heads the ultranationalist Yisrael Beiteinu (Israel is Our Home) coalition party, faced possible charges of fraud, money laundering and witness tampering.
Prosecutors suspect Lieberman of using shell companies and third-party accounts to receive more than $1.2 million illicitly while in public office, including from foreign businessmen with interests in Israel.
Lieberman, who denies wrongdoing, is on an overseas trip and will not attend the hearing headed by Attorney-General Yehuda Weinstein that could last two days.
Israeli media said his attorneys denied at Tuesday's session that Lieberman had any links to shell companies during his time in public office.
The attorney-general could take several more months before deciding whether to put the minister on trial.
If Lieberman is charged, Prime Minister Benjamin Netanyahu would be required to dismiss him from his government.
Although this would not force Yisrael Beiteinu out of the coalition, political analysts have speculated that Netanyahu might take advantage of the situation and seek a snap election, hoping to bolster his party's standing at the expense of Lieberman - his main rival on the political right.
Israel's Deputy Foreign Minister Danny Ayalon told Reuters in London he felt confident Lieberman would avoid prosecution, calling the chances of 13 years of investigations leading to a trial "far-fetched and hypothetical".
"It's been just an unrealistically long process so I'm not sure at all that we will see any indictment," Ayalon said.
Lieberman has a strong following at home and his party is the third largest force in parliament. He has questioned the loyalties of Israel's 1.5 million Arab citizens, drawing accusations of racism but also a large electoral following beyond his Russian-speaking base.
He has proposed population swaps where Arab citizens of Israel would fall under Palestinian rule in exchange for Jewish settlements in the West Bank becoming part of Israel.
In a speech at the U.N. General Assembly in 2010 he said the now-dormant Israel-Palestinian peace process had no chance of success and Israel should pursue long-term interim peace deals.
But Lieberman is often sidelined in statecraft, with his uncompromising support of Jewish settlement building and opposition to a comprehensive peace deal with the Palestinians regularly putting him at odds with Israel's Western allies.
The Israeli newspaper Ma'ariv reported on Tuesday that U.S. Vice President Joe Biden and Secretary of State Hillary Clinton were unwilling to meet Lieberman during a forthcoming visit to the United States because of his views but Lieberman's office has said that his schedule has still to be finalized.
U.S.-sponsored peace negotiations collapsed in 2010 after Netanyahu refused to renew a freeze on West Bank settlements taking up land the Palestinians want for a state. Jordan is hosting exploratory talks to try to restart those negotiations.
While Netanyahu has pledged to continue trying to secure an accord for Palestinian independence, Lieberman - himself a West Bank settler - has written off the talks as pointless.
Netanyahu has publicly supported Lieberman, saying in a statement he hoped the foreign minister would "prove his innocence" and "continue to make his public contribution".
Prosecutors say Lieberman and his confidants are suspected of trying to cover up dealings "through methodical and protracted actions defrauding the public and national institutions".
It further accused him of trying to promote Israel's ambassador to Belarus after the envoy leaked him privileged information about a police investigation against him dating back to the 1990s.
(Additional reporting by Adrian Croft in London; Writing by Ori Lewis; Editing by Crispian Balmer)