The wife of Israeli Prime Minister Benjamin Netanyahu has been formally told that she faces a possible trial over alleged misuse of public funds, the justice ministry said on Friday.

“The attorney general has informed the counsel of Sara Netanyahu, wife of the prime minister, that he is considering putting her on trial, over her part in the 'catering affair',” it said in a statement.

It refers to allegations that she and an aide falsely declared that there were no cooks available at the prime minister's official government residence in Jerusalem and they ordered from outside caterers at public expense.

“In this way, hundreds of meals from restaurants and chefs were fraudulently obtained from chefs and restaurants at a cost of 359,000 shekels ($102,000, 85,000 euros),” the statement said.

“For this reason, the attorney general is considering putting Sara Netanyahu on trial for the offences of obtaining a benefit by fraud under aggravated circumstances, and [other] offences of fraud and breach of trust.”

It added that Sara Netanyahu would be able to argue her case in front of Israeli Attorney General Avichai Mandelblit at a hearing before he makes a final decision on whether to press charges.

“The decision will be taken after the attorney general examines the evidence in the file and hears the positions of the relevant parties and the recommendations of the state prosecutor and the Jerusalem district prosecutor's office,” the statement said.

Cigars and champagne

Netanyahu, 67, is himself under investigation on suspicions of corruption, and last month his former chief of staff signed a deal to turn state's witness in probes involving the premier.

On Wednesday, Netanyahu denied any wrongdoing after reports alleged that Hollywood producer Arnon Milchan was questioned by Israeli police over whether he received favours from the premier in exchange for expensive gifts.

Milchan allegedly gave Netanyahu and his wife Sara gifts including expensive cigars, jewellery and pink champagne.

Israeli media said he was grilled under caution by detectives of the Israeli fraud squad during a session at the Israeli embassy in London.

“Any attempt to describe as inappropriate the deep and long-standing friendship between Prime Minister Netanyahu and Arnon Milchan is baseless and in any case doomed to failure,” a Netanyahu family spokesman said in a statement on Wednesday.

In addition to the investigation involving Milchan, another is probing suspicions that Netanyahu sought a secret deal with the publisher of top-selling daily Yediot Aharonot.

The proposed deal, which is not believed to have been finalised, would have seen Netanyahu receive positive coverage in return for him helping to scale down the operations of Israel Hayom, Yediot's main competitor.

Netanyahu has been questioned about both cases.

The investigations have stirred Israeli politics and led to speculation over whether Netanyahu will eventually be forced to step down, which he is not formally obliged to do unless convicted.

He denies all allegations.

Sara Netanyahu's lawyer said on Sunday that she had successfully taken a voluntary lie detector test at a private facility to try to dispel the allegations against her.

Results of polygraph testing are not admissible as evidence in Israeli criminal trials.