Federal MP Craig Thomson has been arrested at his electorate office.
Members of the NSW fraud squad on Thursday executed an arrest warrant on behalf of the Victorian Fraud and Extortion Squad.
Victorian detectives flew to Sydney this morning where they accompanied NSW police to Mr Thomson's Central Coast electorate office. He was arrested about 1pm.
The Victorian police have spent almost 18 months investigating claims that Mr Thomson improperly used Health Services Union funds to spend on prostitutes, air travel, entertainment and cash withdrawals in excess of $100,000.
In October last year police raided Mr Thomson's Bateau Bay home as well as his electorate office.
They took away large boxes of material.
Mr Thomson was national secretary of the HSU from 2002 until 2007 when he was elected to Parliament. Earlier last year he was suspended from the ALP and has been sitting as an independent in Parliament since that time.
Mr Thomson was charged by virtue of the arrest warrant with a fraud offence.
A further 149 fraud charges are expected to be laid against the 48-year-old when he appears in Wyong Local Court. In a statement, NSW Police said Victorian detectives are expected to apply for Mr Thomson's extradition to Victoria.
The head of the NSW Fraud Squad, Detective Superintendent Col Dyson, will address the media at 3.30pm.
Mr Thomson, who has continued to maintain his innocence, is expected to apply for bail. He is also facing civil proceedings in the Federal Court of Australia relating to allegations that he improperly used union funds for his own benefit.
Opposition Leader Tony Abbott was alerted to the news about Mr Thomson during the question and answer session of his National Press Club address.
"We have certainly respected, or tried to respect, the rule that you do not comment on the specifics of cases which are currently before the courts and we will respect that rule," Mr Abbott said.
But the Opposition Leader said the matter raised questions about the judgment of Prime Minister Julia Gillard, who he claimed ran a "protection racket" for Mr Thomson.
He said the opposition would continue to pursue those judgment questions.
Trade Minister Craig Emerson would not be drawn on whether the independent MP should stand at the next election.
"Let the investigative processes continue without political interference," he told Sky News, adding that Mr Thomson was entitled to the presumption of innocence.
"There has been no finding of guilt against Mr Thomson."
Earlier, Mr Thomson said speculation he may be arrested on fraud charges ''could be right''.
''Let’s wait and see,'' he told AAP.
''[The media report] could be right.'' He said he did not intend to make any public comments at this point but ''if something develops today we’ll certainly be making some comments''.
Mr Thomson has strenuously denied allegations he misused union funds to pay for prostitutes, air travel, entertainment and cash withdrawals when he was the HSU national secretary from 2002 to 2007.
He would be disqualified from Parliament if he was convicted of a criminal offence, carrying a jail term of one year or more.
Victorian police had not contacted him since they raided his home and electorate office on the NSW Central Coast in October last year.
His lawyer, Chris McArdle, told AAP he had not been contacted about any forthcoming charges.
Mr Thomson said if charges were laid, he didn’t expect to be arrested and extradited to face a Victorian court.
Rather, he believes, he would be served a notice to attend court on a future date.
Asked how he was coping with the stress of the investigation, he replied: ''We’re getting on with doing the job.''
Mr Thomson has been suspended from the Labor Party but it would be damaging for the federal government if charges are laid against him.
with Daniel Hurst, Nick Ralston, Judith Ireland