Kirinyanga Governor Anne Waiguru has threatened to sue Nyali MP Mohamed Ali.
This after Ali linked Waiguru to the fresh Sh9 billion at the National Youth Service.
Waiguru has issued seven days to the MP demanding a written apology.
On Tuesday, the Nyali lawmaker released a statement implicating Waiguru, and nine others into the scam.
Ali further listed 40 companies that he alleged to have been directly involved in the latest scam.
"Take notice that unless we hear from you [ within the stipulated time frame] we have mandatory instructions to institute legal proceedings against you at your own peril as to costs and attendant consequences," Waiguru's lawyer Mohammed Muigai said in a statement.
Waiguru said the words used by Ali sought to describe her as a common thief.
"Our client instructs that the defamatory words are actuated by extreme malice and calculated to cause [her] to be ridiculed and treated with contempt and disclaim," Muigai said.