GUILDERLAND — Guilderland town judge Richard J. Sherwood and financial advisor Thomas Lagan were arrested Friday on felony charges, including grand larceny and scheme to defraud, following an investigation by the New York State Attorney General’s Office, which says they stole $4 million from trusts they oversaw.

Sherwood, 57, and Lagan, 59, are each charged with two counts of first-degree grand larceny, one count of first-degree scheme to defraud, and two counts of first-degree criminal possession of stolen property, all felonies.

According to the felony complaint filed in Albany City Court on Friday, during an interview at his law firm on Jan. 21 with Investigator Mark Spencer of the Attorney General’s Investigations Bureau, Sherwood admitted, “in sum and substance,” to conspiring to deceive an Ohio attorney into wiring more than $2 million to a trust that he and Lagan solely controlled; that the trust was a means to steal estate funds and that he and Lagan divided proceeds from it equally; and that the idea for the scheme was Lagan’s but that he, Sherwood, drew up the documents to effectuate it.

The complaint says that, since 2006, the lawyers provided financial services to Warren Bruggeman, who “was the head of Global Nuclear Energy for General Electric and a generous philanthropist to Capital District”; to his wife, Pauline; and to his wife’s sisters, Anne Urban and Julia Rentz. Warren Bruggeman died in 2009, and his wife in 2011; both sisters died in 2013, the complaint says.

The Attorney General’s Office said, in a release, that events unfolded this way:

Warren Bruggeman and his wife created a revocable trust containing sub-trusts designed to provide for Pauline Bruggeman’s two sisters, Urban and Rentz, throughout their lives. Other funds were to be provided outright to the sisters upon the couple’s deaths.

In 2011, the Anne S. Urban Irrevocable Trust, or AUIT, was created, using some of the funds from the Bruggeman trusts; Sherwood was named trustee, and Lagan, successor trustee.

In one instance, a sub-trust of about $2 million was to be returned to the Pauline Bruggeman Revocable Trust, to be distributed to six named charities, upon Anne Urban’s death; the complaint says that, rather than returning those funds after Urban’s death in 2013, the funds were disposed of, “primarily for the benefit of Sherwood and Lagan.”

In another part of the scheme, Sherwood and Lagan allegedly conspired to deceive an attorney in Ohio, where Rentz lived, to send more than $2 million of Rentz’s money to the AUIT, under the premise that it would be distributed to charity; instead, Sherwood and Lagan shared that money.

Sherwood and Lagan formed the Empire Capital Trust to benefit themselves, the release says, and funded it with more than $1 million in stolen money.

In January 2015, the Attorney General’s Office says, they allegedly transferred more than $3.5 million from the AUIT to a Trustco Bank account in Sherwood’s name, and almost $2.7 million from the AUIT to a Trustco Bank account in Lagan’s name.

Lagan, the complaint says, was employed as an investment advisor with a national financial-planning company at the time of the scam.

Sherwood, who had been Guilderland’s town attorney for 14 years and a prosecutor for the Guilderland traffic court for about seven years, was elected on the Democratic ticket in 2013 to be town justice — a newly created third post. He was re-elected last fall.

When interviewed during his campaign in October — and according to court papers — he was a partner with Mazzotta, Sherwood & Vagianelis; a woman who answered the telephone at the firm Friday said that Sherwood no longer works there, but would not say when he left or give her name. The banner across the top of the law firm’s website now reads “Mazzotta and Vagianelis.”

Jacob Crawford, of the Guilderland Democratic Committee, said on Friday that the accusations were “completely shocking” and said that he hoped that everyone would let the investigation take its course before passing judgment. Crawford said Sherwood was “always nice, funny, easy to talk to, and very well-liked by the folks he interacted with.” Throughout the campaign in the fall, Crawford said, the committee received nothing but praise for the work of the town’s three justices.

The investigation involved the New York State Police Special Investigations Unit, the United States Attorney’s Office for the Northern District of New York, the Federal Bureau of Investigation, and the New York State Office of Taxation and Finance, the release says.