An indictment unsealed Thursday alleges Traffic Court Judge Robert Mulgrew and Lorraine Dispaldo misused the grant money, including some allegedly paid to longtime friends of Dispaldo's boss, state Rep. William Keller.
Federal prosecutors say Mulgrew and Dispaldo each signed grant applications for a pair of community organizations that were used to funnel the ill-gotten money to friends, family and associates. Mulgrew's wife is also charged with filing false tax returns.
All three defendants were arrested Thursday morning scheduled to appear in court in the afternoon.
A phone message left at Keller's office wasn't immediately returned.