The Chief Constable of Cleveland Police and his deputy have been suspended from their posts after being arrested by detectives investigating allegations of fraud and corruption.
Sean Price and his deputy Derek Bonnard were arrested and taken to a police station in North Yorkshire where they are being questioned by detectives.
A woman, alleged to be a former member of staff at Cleveland Police Authority, was also arrested on suspicion of the same offences.
The investigation, which is being led by officers from Warwickshire Police, began in May following allegations against present and former members of Cleveland Police Authority.
A Warkwickshire police spokesman said searches were made of several premises following the arrests at around 6am.
He said: "Police officers conducting a criminal investigation into a number of people with current or past associations with Cleveland Police Authority and the manner in which the authority may have conducted some of its business have this morning arrested three people on suspicion of misconduct in a public office, fraud by abuse of position and corrupt practice."
A Cleveland Police Authority spokesman said: "The authority can confirm that two chief officers have been suspended from their posts with Cleveland Police while the investigations are being considered. It should be emphasised that suspension is a neutral act and it should not be inferred from the decision to suspend that the potential conduct matters have been proven in respect to the two chief officers concerned."
Speaking in May, Mr Price said he was considering taking legal action after the IPCC announced it was investigating an allegation that he used "undue influence" to appoint a member of staff to his force.
He denied the accusation about a junior member of staff in late 2008, which he regarded as malicious, and warned that those responsible for "initiating and spreading incorrect information" could be sued for defamation.
The IPCC said the allegation came to light during a review by Her Majesty's Inspectorate of Constabulary into the way some individuals within Cleveland Police Authority "may have conducted some of its business".