Mahmoud Abbas, the Palestinian president has suspended his chief of staff amid allegations of financial impropriety, Palestinian media have reported.
Abbas, currently on a tour of the Far East, ordered the suspension of Rafik al-Hussein on Sunday and launched an investigation into claims made by Fahmy Shabaneh, a former Palestinian intelligence officer, Wafa, the official Palestinian news agency, reported.
The Palestinian Authority receives hundreds of millions of dollars of international donor funding each year, and perceptions of official corruption were one of the main reasons behind the defeat of Abbas's Fatah movement by Hamas in 2006 legislative elections.
Last week, Israel's Channel 10 broadcast a report based on hidden-camera footage and interviews with Shabaneh who alleged that al-Husseini had attempted to trade his influence for sex.
Al-Husseini told journalists in the West Bank town of Ramallah on Sunday that he had been the "victim to a trap set by members of a gang linked to Israeli intelligence".
"This gang used the tape to blackmail me financially and politically, which means that I [should] abandon my work in Jerusalem and leave the homeland. I did not submit to it."
A-Husseini also said that the tape was more than 18 months old and that he had informed Abbas immeidately after the incident.
He suggested that the footage had been heavily edited and the sound dubbed.
Shabaneh said he presented the tape and alleged evidence of financial corruption by senior government officials to Abbas, but was ignored.
However, he has not, so far, presented the documents for public scrutiny.
After the tape was broadcast, Palestinian Authority officials accused Shabaneh of collaborating with Israel and trying to discredit the Palestinian president.
The Palestinian attorney-general has threatened to sue Israel's Channel 10 for "circulating lies and false claims".