Williams and Alderon Iron Ore Corp. (TSE:ADV), a mining company that operates in the province, have launched court action against Brad Cabana, the Sierra Club Canada and its spokesman Bruno Marcocchio.
In statements of claim filed in provincial Supreme Court, the defendants are accused of suggesting the $6.2-billion Muskrat Falls deal is engineered to make money for Williams and mining interests at the expense of customers who will be saddled with debt and higher utility bills.
The statements of claim also say the defendants wrongfully suggested Williams, who sits on the board of Alderon, would benefit from a proposed royalty trust deal to finance the project.
In particular, the plaintiffs take issue with Cabana's political blog. The statement of claim highlights several entries, including one that says Williams and several mining companies "all have a singular business practice in common: find the opportunity; provide initial seed capital; take it public; manage it to takeover; establish a percentage ongoing royalty; and leave. This is how I see the financing of Muskrat Falls happening."
The statement of claim aimed at Cabana says neither Williams nor Alderon are part of any such deal.
"The plaintiffs are not party to or involved with Altius in respect to the financing of Muskrat Falls by way of a royalty trust proposal or agreement or otherwise; and are not hiding such proposal or agreement from the citizens of Newfoundland and Labrador;
"The plaintiffs are not party to or involved with the alleged royalty trust and will not personally gain from such a proposal or agreement."
It says the allegations have done irreparable harm to the plaintiffs' reputations and have registered more than 548,000 online visitors to Cabana's blog since Jan. 21.
Williams and Alderon also take issue with comments made by Cabana on a popular call-in show on VOCM Radio in April about the royalty trust deal that was initially proposed in 2005 by Altius Minerals Corp. The junior mineral exploration company offered to help finance the Muskrat Falls project in exchange for a percentage of revenue from future hydro sales.
Cabana is quoted in the statement of claim saying on VOCM that such a financing arrangement would raise a "troubling problem" because Altius is also a part owner of Alderon Corp. and Danny Williams sits on Alderon's board of directors.
The provincial Tory government is to decide later this year whether to sanction Muskrat Falls after a debate in the legislature and updated cost projections. An estimated price tag of $6.2 billion is expected to grow in part because of rising labour costs.
Cabana, who ran unsuccessfully for the provincial Liberals last year after his bid to lead the Tories was disqualified, says the lawsuit is an attempt to silence him.
He says he has simply raised connections between Williams, who retired as premier in December 2010, and mining companies that would benefit from subsidized Muskrat Falls power.
"They're trying to intimidate me but I won't be intimidated," the Newfoundland resident and retired military captain said Thursday from Saskatoon. "I'm an ex-military man. I've fought politics for 25 years.
"I've known much bigger and much stronger and much better people, and I'm not intimidated whatsoever. I will fight it if it actually goes to court."
Sierra Club Canada executive director John Bennett says the group apologized for alleged defamatory comments also made on VOCM in April, but the statement of claim says it didn't fully retract them and even repeated some of them.
Marcocchio is accused of agreeing with the call-in show's host when he asked if Marcocchio was suggesting that Williams and Alderon executives are "a bunch of corporate psychopaths ... who stand to make millions by pulling this deal off."
Bennett said Thursday that Sierra Club Canada responded to a letter dated May 22 from the Toronto-based Cassels Brock law firm demanding a written retraction of the alleged defamatory statements.
"It was not our intention to defame anyone or any company," he said in an interview. "We were making what we thought was fair comment. The comments that were most objectionable in the broadcast were not actually made by Mr. Marcocchio. They were made by the host. But we did apologize for that as well because we thought it would correct it."
Bennett said the group hopes to resolve the matter "amicably."
"We're not in the business of defaming people. We like to raise public issues, and whether Muskrat Falls proceeds or not, how it's financed is in the public interest to make sure that's well debated."
Sierra Club is also part of a legal challenge asking the Federal Court to review a joint federal-provincial environmental panel's approval of Muskrat Falls. Bennett said the panel did not fully consider environmental impacts or alternatives as required by its terms of reference.
Cabana said he did not respond to the letter demanding he retract his comments.
A spokeswoman for Williams said Thursday he would not comment further.