The allegations stem from a tweet sent Friday by Wayne Bennett, a retired naval logistics officer who said Monday his comment has been taken out of context by Tory activists bent on undermining his leadership bid.
"What you have is the party conjuring up a crisis," Bennett said in an interview.
"They know that I want to change the face of the PC party of Newfoundland and Labrador. ... They will stop at nothing to demoralize or demean ... to get (me) off the ticket."
Bennett, one of three people running for the leadership, said the tweet in question was posted to draw an analogy between party activists who he says are using fake Twitter accounts to subvert his campaign and female suicide bombers who conceal explosives under their clothes.
"When we were on (military) checkpoints, Muslim women and children, we used to respect them and trust them," Bennett said, adding he was referring to Canada's involvement in the war in Afghanistan. "And now, we don't do that anymore because they were hiding explosive devices."
Bennett said he is being unfairly targeted by party brass.
"The party hacks took that and said, 'Now we have Bennett by the hook because he made a racist remark,'" he said. "My remark was not racist. I said 'some' Muslim women and children 'could' actually be suicide bombers."
Tommy Williams, co-chairman of the party's leadership convention scheduled for July, said he filed a complaint with the party, which has in turn asked its rules committee to determine if Bennett violated the party's constitution.
"Any form or racial slur or any comment of that nature certainly violates that to the core," he said in an interview. "As a party, we in no way want to be affiliated with comments which seem to be offensive to any religious group."
Williams said Bennett could face a variety of disciplinary measures, including a reprimand, fines or expulsion from the leadership race.
Bennett will be asked to make a written submission to the committee and a decision is expected within the week, Williams said.
If he's kicked out of the race, Bennett said he'll launch a court challenge.
He also said he fears for his life now that he's openly challenging the party.
"They are the political Mafia of Newfoundland and Labrador," he said, referring to the party he wants to lead. "I know what they're capable of doing. I've been in the backrooms with them."
Williams dismissed Bennett's allegations.
"There's been nothing presented to support that in any way, shape or form," he said. "These are unfounded allegations that he's been making."
Bennett is a town councillor in the western Newfoundland community of Howley. He is also a founder of the now-defunct Newfoundland and Labrador First Party, which was largely devoted to making life better in rural parts of the province.
His rivals in the leadership race are Corner Brook businessman Frank Coleman and fisheries magnate Bill Barry, CEO of the Barry Group of Companies.
— By Michael MacDonald in Halifax.