The former chairman of Cleveland Police Authority, Councillor Dave McLuckie, has been arrested on suspicion of perverting the course of justice.
He is also suspected of obtaining a financial advantage by deception and fraud.
The Redcar and Cleveland councillor was arrested by officers from Operation Sacristy - which is a criminal investigation into alleged corruption at the police authority.
He has been released on police bail until November 16. A file of evidence is being submitted to the Crown Prosecution Service.
Mr McLuckie resigned from the police authority in May 2011, when Operation Sacristy began, but denies doing anything wrong.