Indian American Nikki Haley attacked with racial slur
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Republican state Senator Jake Knotts also attacked President Barack Obama in comments on an internet political show called Pub Politics.
Haley, the 38-year-old mother of two, who was born a Sikh and describes herself as a Methodist, became target of racial slur typically used against Arabs or other ethnic groups that wear turbans or headdresses.
"We already got one raghead in the White House," Knotts said. "We don't need another in the Governor's Mansion," he was quoted as saying by 'The State', a South Carolina newspaper.
Knotts reportedly also talked at length about Haley's parents' religion and her family.
Haley campaign manager Tim Pearson said Knotts was an embarrassment to the state, and that South Carolina voters would make it clear on Tuesday they are better than this.
Knotts now insists that his comments were made in zest and also agreed to apologise.
"My 'raghead' comments about Obama and Haley were intended in jest," he said.
"Bear in mind that this is a freewheeling, anything-goes Internet radio show that is broadcast from a pub. It's like local political version of 'Saturday Night Live'", he said in a statement.
"Since my intended humorous context was lost in translation, I apologise. I still believe Ms Haley is pretending to be someone she is not, much as Obama did, but I apologise to both for an unintended slur," the Republican politician added.
The show's host, Wesley Donehue, told the newspaper: "I, along with everyone else at the table, was shocked."
Republican Haley currently serves in the South Carolina House of Representatives where she represents Lexington County, and is the first Indian-American to hold office in that state.
Haley's religion was also raised as an issue during her first South Carolina House run in 2004, when anonymous fliers claimed that she was a Hindu, which is incorrect.
The daughter of a Sikh Punjabi immigrants faced more trouble this week, as a political lobbyist claimed that he had a tryst with the Republican candidate, who is already facing allegations of an extra-marital affair.
Haley, whose husband is a US Army reserves officer, has been hit by allegations that she had a "physical" relationship with commentator Will Folks.
Haley has refused to make her texts and emails public in order to clear up the controversy.
Haley maintains she has been faithful to her husband for 13 years and her campaign rejected the latest allegations as "a false and outrageous desperate attack from a losing candidate's paid campaign consultant in the final week of the race".
If elected, Haley would be only the second governor of Indian origin in the US after Louisiana's Bobby Jindal.
She currently has the backing of political Republican heavy weights like Sarah Palin and Mitt Romney.
A strong pro family, pro life, pro Second Amendment, pro development, conservative reformer...your next governor Nikki Haley," Palin said in her endorsement.
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