A former longtime Windcrest city manager and his developer brother were indicted on three felony counts Thursday, accused of embezzling more than $4 million from the city and Internet hosting company Rackspace Hosting Inc.

If convicted of the first-degree felonies, the brothers could land in prison for life.

Ronnie Cain, 60, who worked for the city of Windcrest for 28 years before suddenly resigning from his position as chief administrative officer in March, and his brother Gary, 53, were arrested at their homes by Texas Rangers and Bexar County sheriff's deputies Thursday evening.

The arrests came shortly after a Bexar County grand jury issued the multicount indictments.

An arrest warrant alleges the brothers "embezzled over $4 million" said Sheriff's Office spokeswoman Linda Tomasini, quoting from the document.

Late Thursday, the men were being booked into Bexar County Jail in lieu of $250,000 bail each, Tomasini said.

During the booking process, Gary Cain began experiencing chest pains and was taken to University Hospital, the sheriff's spokeswoman said.

The arrests culminated a nearly yearlong joint investigation by the Bexar County district attorney's office and the Rangers, said Cliff Herberg, first assistant district attorney.

The criminal investigation was the fallout of a civil lawsuit that alleged Gary Cain took $2.8 million fraudulently from a $5 million escrow account Rackspace funded for infrastructure improvements.

The fund was part of the deal in the city's successful effort to lure the firm to the site of the former Windsor Park Mall.

As the investigation heated up, Ronnie Cain announced he was retiring. He said the decision was not related to the investigation.

In April, Rangers and the DA's office searched Gary Cain's office, seizing documents, records and computer files.

The affidavit used to secure that warrant alleged that Ronnie Cain had a sexual relationship with the former city secretary and described expensive gifts he gave the woman.

The affidavit said Gary Cain used the fraudulently obtained money to buy jewelry and furniture and to take "lavish trips" to Beverly Hills, New York and Puerto Rico. His daughter was the subject of an MTV "My Super Sweet 16," episode, a program that chronicles coming-of-age celebrations typically thrown by wealthy parents.

Herberg said Thursday that the evidence gathered in the April raid led to Thursday's indictments.

More Information COURTESY PHOTO Ronnie Cain: He was Windcrest's city manager for 28 years before suddenly resigning in March. See More Collapse

""It's alleged (the Cain brothers) presented cost certificates to the Windcrest City Council as well as Rackspace that caused them to approve expenditures in excess of the cost actually paid for projects," Herberg said.

The April search affidavit alleges Gary Cain fraudulently inflated those costs by more than $7 million, and that Ronnie Cain knew the true price paid for the land. The brothers are accused of pocketing the difference.

Once the criminal probe was launched, its focus broadened beyond a single transaction, Herberg said.

In the end, the brothers were each indicted on charges of:

. Misapplication by a fiduciary of more than $200,000.

. Securing execution of a document by deception of more than $200,000.

. Theft of more than $200,000.

Each is a first-degree felony, punishable by a term of up to life in prison.

Ronnie Cain also was indicted on a charge of theft by a public servant of between $20,000 and $100,000, a second-degree felony punishable by up to 20 years.

Attorneys for the brothers, who were not available for comment, have said their clients did nothing wrong.

As originally published, this story contained an error.