Senior Counsel Tom Ojienda has been arrested.
Ojienda was arrested on Friday afternoon at an undisclosed location in Nairobi and taken to the DCI headquarters on Kiambu Road.
The officers drawn from the Special Crimes Prevention Unit and Flying Squad are also searching for a High Court judge.
Sources said Ojienda and the judge will be questioned over
million "fake legal fees' paid to him by Mumias Sugar Company.
DCI chief George Kinoti could not be reached for comment, but sources said he was personally supervising the operation to arrest Ojieda and other suspects.
The sources said Ojienda is likely to be locked up the entire weekend and presented in court on Monday.
Ojienda's arrest was approved by DPP Noordin Haji, who last week received the investigation files on the matter.
A special team of investigators comprising officers from the DCI legal department and the ODPP has been investigating the suspected loss of Sh200 million from the sugar company.
The arrest comes in the wake of a protracted court battle between Ojienda and the KRA over tax compliance.
The taxman has filed an appeal after High Court judge Wilfrida Okwany directed that KRA issue a tax compliance certificate at a time when the taxman is demanding Sh443.6 million arrears from the advocate.
In its appeal, the KRA argued that Okwany erred in issuing the order, and that the directive will make the lawyer tax-compliant despite a row over tax arrears.
Ojienda had sued KRA arguing that denying him tax clearance was calculated to sabotage his race to be voted as the lawyers’ representative at the Judicial Service Commission (JSC).