By Steven Scheer
JERUSALEM (Reuters) - Jacob Frenkel's return as head of the Israeli central bank hit a new hurdle on Tuesday when the Justice Ministry said the attorney general would investigate a suspected shoplifting incident involving Frenkel in 2006.
The Haaretz daily reported at the weekend that Frenkel was detained at Hong Kong airport in 2006 on suspicion of stealing cologne from a duty-free shop. He was later released without charge.
Frenkel, who is expected to return to Israel this week from the United States, said in an emailed statement that the incident was a "misunderstanding" and that Hong Kong authorities had apologized at the time.
He did not comment on the details of the incident, the details of which could not immediately be verified.
Israel's Turkel committee, which vets all appointments of senior civil servants, had been looking into the matter. It has now asked Attorney General Yehuda Weinstein to examine the incident before it decides on Frenkel's appointment.
"The attorney general and his team are ... working to get the facts and various details upon the request of the Turkel committee and in coordination and cooperation with it," the Justice Ministry said on Tuesday.
"After establishing the facts, he will formulate a legal opinion and give the results to the Turkel committee," it said.
A ministry spokeswoman said she could not elaborate.
Israeli leaders have yet to comment on the issue, but commentators and citizens groups have called for Frenkel's nomination to be withdrawn.
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.
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.
Haaretz reported that Frenkel appeared before the Turkel committee last week but did not mention the Hong Kong incident.
Newspapers said that Weinstein would ask for assistance from legal authorities in Hong Kong through the Foreign Ministry and seek documents from officials who worked at the Israeli consulate in Hong Kong at the time.
If Frenkel's appointment is approved by the Turkel Committee it will then need the approval of Israel's cabinet.
Deputy Governor Karnit Flug has been standing in as central bank chief since Fischer stepped down.
(Editing by Hugh Lawson)