By Richard Weizel

NEW HAVEN, Connecticut (Reuters) - Former Connecticut Governor John Rowland, who was forced to resign from office a decade ago for corruption, pleaded not guilty on Friday to charges he violated campaign laws.

Rowland, who spent 10 months in prison in 2005 and 2006, told the judge he understood the seven-count indictment filed on Thursday that accused the 56-year-old Republican of trying to conceal payments made to him by two congressional campaigns that he worked on in 2009 and 2012.

"Not guilty, your honor," he told the judge, standing in a dark pinstriped suit.

U.S. District Court Judge Ellen Bree Burns set his bail at $250,000 and ordered Rowland not to leave the state.

Rowland faces up to 20 years in prison on each count of falsification of records in a federal investigation, U.S. prosecutors said.

The candidate in the 2012 campaign, Lisa Wilson-Foley, and her husband, last month pleaded guilty to charges involving illegal campaign contributions.

Rowland's attorney, Reid Weingarten, told reporters after the arraignment that Rowland would "aggressively challenge" the charges.

"One of the candidates herself, Lisa Wilson-Foley, who was required to report any campaign contributions has been allowed to plead to a misdemeanor, but he (Rowland) is facing 37 years in prison," Weingarten said outside the courtroom. "We will aggressively challenge these charges and can't wait for the trial. We are looking forward to it."

Rowland served as Connecticut's governor from 1995 to 2004, when he resigned amid another corruption scandal. He pleaded guilty to a conspiracy charge for accepting gifts from people doing business with the state and served a federal prison sentence.

Rowland served as a congressman for the state from 1985 to 1991.

(Reporting by Richard Weizel; Editing by Scott Malone, Jonathan Oatis and Andre Grenon)