Venice Mayor Giorgio Orsoni is among 35 people arrested in Italy over alleged corruption in connection with new flood barriers built to protect the city.
Giorgio Orsoni and dozens of officials and businessmen are being held over claims of bribery during the public tender process of the Moses project.
Seventy-eight mobile barriers will be used to shut off Venice lagoon in the event of rising sea levels and storms.
Venice is continuing to sink and is hit by flooding on a yearly basis.
Construction of the barriers began 11 years ago but has been hampered by delays in funding due to Italy’s economic crisis.
Once finished, the floodgates will extend more than a mile, blocking the three inlets to the lagoon.
Investigators are looking into allegations that 20 million euros ($27 million) in public funds was sent to foreign bank accounts and used to finance political parties, according to reports.
Giorgio Orsoni, 67, has been placed under house arrest while he is investigated for corruption, extortion and money laundering, Italy’s Ansa news agency reports.
His lawyers say the allegations against him are “hardly credible”, according to AFP news agency.
Prosecutors have also requested the arrest of a former governor of the Venice region, Giancarlo Galan, an ally of former PM Silvio Berlusconi.
Giancarlo Galan, who is currently protected by parliamentary immunity, launched the so-called Moses project – or The Experimental Electromechanical Module (MOSE) – in 2003 with Silvio Berlusconi.
Among those detained on Wednesday as part of the three year-long corruption inquiry are the regional head of the ruling Democratic Party, Giampiero Marquis, regional councillor for infrastructure Renato Chisso, and the president of a co-operative involved in the long-running project, reports say.
Some 100 other people are also said to be under investigation.
The operation comes after the arrest of Giovanni Mazacurati, the former head of the consortium building the barriers, over alleged contract rigging last year.
The massive Moses scheme has reportedly cost some 5.4 billion euros ($7.4 billion) and was due for completion this year but has been repeatedly hit by delays.
Some Venetians argue the project is a waste of money and there is no guarantee it will work.
In 1966, some 5,000 people were left homeless when flood levels in the city reached 6ft, causing immense damage.