A defiant Arizona elected official accused of running a human smuggling scheme involving pregnant women from the Marshall Islands pleaded not guilty Tuesday to state charges of fraud and theft and plans to go to court to challenge his work suspension.

Attorney Kory Langhofer said that Maricopa County Assessor Paul Petersen will try to resolve the dispute outside of court, but will file a lawsuit contesting the county governing board’s decision to enact a 120-day unpaid suspension if those efforts fail.

Federal prosecutors have alleged Petersen was the head of an adoption ring that illegally paid women from the Marshall Islands to give birth in the U.S. and then give their babies up for adoption. Petersen allegedly relied on associates on the islands, where he’d done a two-year mission for The Church of Jesus Christ of Latter-Day Saints, to recruit women by offering them $10,000 each, then charged U.S. families between $25,000 and $40,000 per adoption.

After Petersen refused calls to resign, the Maricopa County Board of Supervisors suspended the assessor, whose office determines the value of properties in Phoenix and its suburbs for tax purposes. The board doesn’t have the power to remove him from office, but it said the law allows it to suspend Petersen, a Republican, for “neglect of duty” due to his absence from work while he’s been incarcerated.

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Petersen has been indicted in federal court in Arkansas, and he’s also charged with crimes in Utah. He has pleaded not guilty to the federal charges and has not yet been arraigned in Utah.

Langhofer has said the board's Oct. 28 decision to suspend Petersen isn’t constitutionally sound because his client and the board are equals and supposedly can’t oust each other.

"They have decided to throw him out regardless of what the constitution says, and so I suspect this is going to end up in court," Langhofer said.

The board said an audit of the Petersen’s office after his arrest found files from the adoption business on his county computer, which can’t be used for personal business.

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"The board believes they are on solid legal footing," county government spokesman Fields Moseley said in response to Langhofer's claims.

In addition to his work as an assessor, Petersen did private-sector work in adoptions. The smuggling case spans three years and about 75 adoptions. Authorities said the scheme defrauded Arizona’s Medicaid system of $800,000 because the women had no intention of remaining in the state when they applied for benefits.

Authorities said the women came to the U.S. before they were due to give birth and were kept into cramped homes Petersen owned or rented, sometimes with little to no prenatal care. Under a compact between the U.S. and the Republic of the Marshall Islands, Marshallese citizens can enter the United States and work without a visa, but cannot to so if they are traveling for adoption, authorities said.

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Authorities in all three states said the birth mothers and the adoptive families did not commit any crimes and will not be facing any charges. None of the completed adoptions will be undone as authorities do not believe the women were misled into believing their children would be returned at some point.

Fox News' Vandana Rambaran and the Associated Press contributed to this report.