Jacob Frenkel on Monday dropped his bid to lead the Bank of Israel after an investigation was launched into an alleged shoplifting incident in a duty free store at a Honk Kong airport in 2006.
"In an unreasonable and intolerable way they put a man on the stake without all the facts, simply based on speculation," he wrote in his statement, according to Channel 2.
Israel's Turkel committee, which vets all appointments of senior civil servants, had been looking into the alleged shoplifting incident and has asked Attorney General Yehuda Weinstein to examine the incident before it decided on Frenkel's appointment.
Though Frenkel claimed that the incident was a "misunderstanding," the fact that he did not report it to the commission posed another legal hurdle.
Attorney-General Weinstein had opened an investigation into the matter.
In the interview with Channel 2, Frenkel gave his version of the incident at the Hong Kong airport: "I was at the duty free in Hong Kong … They thought that I had left with a large garment bag that I didn't pay for," he said, noting that the item could not have been easily concealed.
Initial media reports about the incident alleged that the item in question was a bottle of perfume.
"I had arranged with a friend that she would stand in line and pay for it," Frenkel continued, suggesting that when he received the bag he was mistakenly under the impression it was bought and paid for.
"When she came to me and told me what happened, she was very embarrassed," he recalled. "I had to console her. The authorities accepted my version of the events and apologized."
"I got on the next plane to Israel," Frenkel said, insisting that "no one doubts" the accuracy of his explanation.
On July 19, Frenkel presented his side of the story before the Turkel Committee. Asked why he did not address the issue publicly earlier in the ordeal, he said: "You don't address a matter that is being discussed by the committee in the media.
"I told the committee that I'm being burned at the stake," Frenkel told Channel 2. "They have slandered my name but I have avoided addressing each lie. The committee appreciated my silence."
"… I have agreed (to give an interview) after having a long conversation with the prime minister and the finance minister, and notifying them that I have withdrawn my candidacy," he said.
Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid nominated Frenkel last month as governor to replace Stanley Fischer, who stepped down at the end of June after eight years in the post.
During the interview, Frenkel claimed that some individuals sought to taint his professional reputation and cast doubt over his honesty in order to ensure that he is not confirmed for the job.
In a joint statement, Netanyahu and Lapid expressed their regret at Frenkel's decision. "In the atmosphere that exists today, we are not far from the day that nobody will want to go near public life." The two said they would choose another nominee in the coming days.
Frenkel, chairman of JPMorgan Chase International and former vice chairman of insurer AIG, was Bank of Israel governor from 1991-2000 when he gained a reputation as an inflation hawk.