Colin Craig told his former press secretary, Rachel MacGregor, he had set aside a million dollars to destroy her, the High Court in Auckland has been told.
Ms MacGregor is giving evidence in court today, where Mr Craig is suing blogger Cameron Slater over posts he made online.
She said she had a pay dispute with Mr Craig - the former leader of the Conservative Party - and they could not agree on an hourly rate.
Instead of being paid, she was given two $10,000 advancements and an $18,000 loan.
She said after she resigned she sent a letter to Mr Craig, saying she was making a complaint to the Human Rights Tribunal.
Ms MacGregor said Mr Craig then began charging her 29 percent interest on the loan, which she described as "bully tactics".
She said during a mediation hearing, Mr Craig told her he had set aside a million dollars to destroy her.