Marisol Yague is among 22 members of Marbella's council, or linked to it, detained on suspicion of siphoning off €2.4bn (£1.7bn) from the illegal sale of town hall building licences.
Juan Antonio Roca, Marbella's urban planning adviser, was remanded in custody yesterday on suspicion of masterminding the scam. The deputy mayor, Isabel Garcia Marcos, returned to Marbella after cutting short her honeymoon in Moscow and was also detained. Ms Yaguefaces charges of using public funds to pay for home improvements.
Police have frozen thousands of bank accounts, and taken legal action to secure dozens of country houses, 400 artworks, a €2m helicopter, 14 luxury vehicles, 5kg of precious jewellery, 103 thoroughbred horses, and a farm containing 100 fighting bulls.
A total of €465,200 and $3,000 in cash has been seized, as have 19 computers, five truckloads of documents and 24 firearms. This treasure trove was squirrelled away in locations throughout southern Spain and Madrid. Police also raided a housing estate where 1,500 luxury villas are under construction, a country house whose estate includes a 100-hectare orange grove and a heliport.
Accumulation of this fortune - none of which went into municipal funds - is said to have been masterminded by Mr Roca, who collected money in exchange for granting municipal licences, and redefining land for building purposes to suit construction companies and property promoters who paid huge sums for the privilege.
Mr Roca began his career as urban planning supremo during the reign of the late Jesus Gil, mayor of Marbella between 1991 and 2002. Mr Roca allegedly persuaded Mr Gil's successors to approve his projects whose benefits went directly into a secret "cashbox B".
The alleged fraud centred on Spain's 10-year speculative building boom, during which up to 30,000 properties in Marbella are said to have been built illegally. Andalusia's regional government asked Ms Yague 54 times to correct the illegal licences granted by her predecessors, but the requests were ignored. Ms Yague said she had no idea what was going on and her conscience was clear.
The detainees are accused of fraud, bribery and misuse of public funds. Angry residents marched through Marbella on Thursday night demanding that the accused resign. Regional authorities are expected to dismiss the entire municipal team once they have received a judicial report.
Under the rule of Mr Gil, Marbella became a playground for Arab and Russian millionaires, and the haunt of competing mafias dedicated to laundering the proceeds of gun running, drug smuggling and protection rackets.
A year ago, 41 people were arrested in Marbella on suspicion of organising Europe's biggest money laundering network, worth at least €250m. Among those detained were seven lawyers suspected of using a legal firm to set up companies that invested illicit funds in luxury goods and property throughout the Costa del Sol.
Police are investigating possible links between that money laundering ring and this latest fraud scandal.