JEFFERSON CITY, Mo. (CN) - His Republican challenger claims in court that Gov. Jeremiah Nixon defamed him by accusing him of using bank bailout money for his own gain.
David Spence sued Nixon in Cole County Court.
Spence, who made a fortune as president of a plastic bottle company, claims Nixon's ads falsely claim that he ran a bank and used federal bailout money to buy a vacation home.
Nixon's three ads have been on the Democratic governor's campaign website since Oct. 11, according to the complaint.
The complaint states: "With actual malice, defendant caused false statements to be made regarding plaintiff David Spence, a St. Louis small business owner. Defendant falsely claimed Spence is a St. Louis 'banker' who ran a St. Louis bank 'into the ground,' and that Spence used the proceeds from a stock sale to the U.S. Treasury for his own benefit instead of having 'taxpayers' repaid. Defendant knows Spence is not a banker, knows he did not 'run' the bank, and knows that the loan business he brought the bank did not affect (and could not affect) the bank's dividends or redemption of preferred shares from the Treasury."
Spence said in a statement on his website: "I filed this lawsuit for one simple reason, we need good people in politics. If the standard for truthfulness in political campaigns is there is no standard, our state and country will continue to erode because good people won't run for office. Jay Nixon's attack ads are false and defamatory and he knows it. If he had a record of accomplishment to run on he wouldn't need to lie about me, but he doesn't. Missourians deserve a governor who won't lie about his own record and about his opponent. Jay Nixon should be fired."
Spence claims the ads contain three false statements that the Nixon campaign knew were false.
The first statement was that Spence ran a bank into the ground, requiring a $40 million bailout.
Spence says he never ran a bank, but did serve on the board of directors of Reliance Bank, which is wholly owned by Reliance Bancshares.
Spence says he was elected to the board on May 5, 2009 - after the bank took the federal money on Feb. 23, 2009.
Spence claims that as a director his job was strategic planning and supervising management - not making or approving loans.
The second false allegation, Spence says, is that he used bailout money on himself, instead of repaying taxpayers.
Spence claims that he decided to give loan business to Reliance in April 2010, and that he took out a $1.1 loan to finance a residential property.
"The loan was 'made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other persons, and did not involve more than the normal risk of collectability,'" the complaint states. "See Form 10-K, March 30, 2011 (reporting on loans made in 2009 and 2010). Further, the loan had to be (and was) approved by disinterested directors - not Spence - and had to comply with Regulation O, which strictly regulates loans to directors and officers."
Spence claims the loan helped the bank, which was looking for loan business from proven borrowers, improve the quality of its loan portfolio.
"On September 21, 2010, less than six months after borrowing $1.1 million from Reliance Bank, Spence injected more cash than the amount he had borrowed, over $1.5 million in personal capital, into its parent, Bancshares," the complaint states.
"He did this by buying 500,000 shares of Class A Common Stock - not the preferred (senior) stock held by the federal government - at $3.00 per share, a price the stock did not see again."
The third false statement, Spence says, suggests that he is spending millions of dollars to run for governor, while he has a bank that could have repaid repay the bailout funds before he ran for office.
But "no part of the money Spence has spent on the race for governor came from TARP funds, and Spence is no longer a director or shareholder of the bank and was not, and is not, in position to use his money to cause the bank to 'repay' TARP funds or to pay deferred dividends to the U.S. Treasury or any other preferred stockholder," Spence says in the complaint.
As a public figure, running for governor, Spence has a high bar to jump to prove defamation, including his claim of "actual malice."
"Defendant authorized or ratified the publication of these false statements with knowledge that they were false, or at least with reckless disregard for whether they was true or false at a time when defendant had to have serious doubt as to whether they was true," the complaint states. "The falsity of each statement can be readily confirmed by reference to public filings that are available online and that defendant has selectively and misleadingly cited to the media in attempting to justify portions of their statements."
Spence's lawsuit brought a terse response from Nixon's camp, which is sticking by the ads.
"The stress of the campaign is clearly taking a toll on Dave Spence, but he should take a deep breath, and consider honestly defending his record at the bank instead of having his campaign manager file a frivolous lawsuit," Nixon's campaign manager Oren Shur told Courthouse News in a statement.
"This week, TV stations across Missouri rejected Dave Spence's attempts to bully them into removing ads, because the facts are clear: While serving as a director of a bank that took a $40 million bailout from Washington, Mr. Spence bought 500,000 shares of stock in the bank and took a million-dollar insider loan for himself, but then voted on February 11, 2011 against repaying the bailout money to the taxpayers. You see a lot of crazy stunts during the course of a campaign, but this frivolous lawsuit is misguided and desperate."
Spence seeks punitive damages for defamation. He is represented by Edward Greim, with Graves Bartle Marcus & Garrett, in Kansas City, Mo.
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