Nena Reeves has served notice on David Rouzer that she intends to sue him in state Superior Court for defamation over a mailer that links her to Medicaid fraud. Reeves said the mailer is false, malicious and intended to turn voters against her in Tuesday's primary.

The mailer does not accuse Reeves of Medicaid fraud, but it does say that "there are the numerous examples of Medicaid fraud involving Nena Reeves' company's employees." It also says that "a company recently owned by Nena Reeves owed the State of North Carolina over $400,000."

The mailer says its claims are based on a News & Observer story published Feb. 26, and on Medicaid fraud reports on file with the National Association of Attorneys General from 1996 to 1998.

The N&O noted that Health Services Personnel Inc. was among dozens of companies that a state audit had found to be overcharging for Medicaid services. Reeves said those charges happened after she sold the company in 2005.

Reeves said that when she owned the company there were cases where she and her staff caught employees skimming money -- falsifying time sheets, for example -- but she fired them and reported them to investigators. She suspects those cases were the basis for the mailer's claim.

Larry Wagner was the deputy director for the state's medicaid investigations unit in the mid-1990s. He said that Reeves did not tolerate employee theft. He said the mailer was "patently unfair."

"Quite frankly, many providers would not self report if they caught an employee stealing," Wagner said. "They would just try to terminate the employee and keep it quiet. She wasn't like that. She self-reported."

Rouzer stands by the mailer, saying the information came from public records. He declined to say whether Reeves was involved in the overcharges or the Medicaid fraud.