Rep. Jose "J.P." Miranda, a 34-year-old Democrat who represents the Germantown section of Philadelphia, and his sister are both facing felony charges.
At a news conference on Monday afternoon, District Attorney Seth Williams said the investigation began after a local news story alleged an employee of Miranda, named in the indictment as Timothy Duckett, was being paid as a 'ghost worker.'
Duckett's hiring came, Williams said, after Miranda tried to hire his sister, Michelle Wilson, 28, as his legislative chief of staff in December, 2012.
When Miranda learned that nepotism rules prevent him from hiring a family member, Williams said Miranda hired Duckett with the understanding he would have to do little work and some of the money would be funneled to Wilson.
According to Williams, Duckett was told he did not have to work 40 hours a week and would only be expected to drive Wilson to different locations when called upon.
Meanwhile, Williams said, Wilson actually functioned as the legislative chief of staff.
Miranda and Wilson will be charged with three felonies: conflict of interest, conspiracy to commit conflict of interest and perjury for allegedly lying to the grand jury, Williams said.
Duckett is not being charged and is cooperating with the investigation, authorities said.
Miranda was elected in 2012 and represents the 197th Legislative District.
"For a long time it appeared that these types of cases would not be investigated nor prosecuted, but that is no longer the case. We will no longer abdicate our responsibility to investigate and prosecute corruption to other authorities," Williams said at the news conference.
Both Miranda and Wilson were unavailable for comment on Monday and Miranda's legislative office was closed.
Williams said Miranda and Wilson are expected to surrender to authorities in the next few days.