HAMMOND, Ind. (CBS) — The mayor of Lake Station, Ind. and his wife and stepdaughter pleaded innocent Thursday to an indictment on federal corruption charges.

CBS 2’s Chelsea Irving reports Keith Soderquist, 44, and his wife, Deoborah, 55, have been accused of taking money from his campaign fund and the city’s food pantry account, to use on gambling expenses at casinos in Indiana and Michigan. Deborah Soderquist has worked as an administrative assistant for her husband.

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The Soderquists are also is accused of filing false tax returns for the years 2010, 2011, and 2012.

They surrendered to federal authorities Thursday morning, and appeared in handcuffs at the federal courthouse in Hammond, where they pleaded not guilty to all charges.

The Soderquists both were released on $40,000 bonds.

Their attorney, Scott King, said Keith Soderquist might have done some sloppy reporting of campaign finances, but did nothing illegal.

“At the end of the day, every penny they ever received from the campaign fund was reimbursement for expenses they had personally incurred on behalf of the campaign. Therefore, there is no act of fraud,” King said.

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Keith Soderquist’s stepdaughter, Miranda Brakley, also was indicted in a separate case accusing her of stealing $5,000 from the Lake Station City Court, and the Soderquists of helping her avoid arrest. Brakley is a former employee of Lake Station; she also pleaded innocent.

King said Keith Soderquist plans to return to his mayoral duties as normal as is possible, but admitted it would be difficult to do so.

The city council meeting was heated Thursday night, with residents questioning how alleged misdeeds could have occurred under the noses of elected officials.

“I had no idea personally. It came as a shock to me,” Councilman-at-Large Garry Szostek said.

“You guys had no idea this was going on? I have 50 emails I’ve emailed you on things that don’t seem right, with no response,” resident Kim Frizzell countered.

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