Ann Hunnewell and her central Florida police officer husband knelt in the living room of a fellow officer's home, with pillow cases as makeshift hoods over their heads. A few words were spoken and they, along with a half-dozen others, were initiated into the local chapter of the Ku Klux Klan, she says.

Last week, that initiation ceremony, which took place five years ago, stunned residents of the small town of Fruitland Park, who found out an investigative report linked two city officers with the secret hate society that once was violently active in the area. Ann Hunnewell's ex-husband, George Hunnewell, was fired, and deputy chief David Borst resigned from the 13-member Fruitland Park Police Department. Borst has denied being a member.

James Elkins, a third officer who Ann Hunnewell says recruited her and her husband, resigned in 2010 after his Klan ties became public.

Violence against blacks permeated the area more than 60 years ago, when the place was more rural and the main industry was citrus. These days, the community of less than 5,000 residents about 50 miles northwest of Orlando has been infused by the thousands of wealthier, more cosmopolitan retirees in the area. Those who live in the bedroom community, which is less than 10% black, have reacted not only with shock, but disgust that officers could be involved with the Klan, the mayor said.

"Maybe I'm ignorant, but I didn't realise that they still met and organised and did that kind of thing," said Michele Lange, a church volunteer.

Mayor Chris Bell says he heard stories about a Klan rally that took place two years before he arrived, in the 1970s, but he has never seen anything firsthand. As recently as the 1960s, many in law enforcement in the South were members but "it's exceedingly unusual these days to find a police officer who is secretly a Klansman," said Mark Potok, a senior fellow at the Southern Poverty Law Center, which monitors hate groups.

While the Klan used to be politically powerful in the 1920s, when governors and US senators were among its 4 million members, nowadays it is much less active than other sectors of the radical right and has less than 5,000 members nationwide, Potok said.

"The radical right is quite large and vigorous. The Klan is very small," he said. "The radical right looks down on the Klan."

Fruitland Park, though, has been dealing with alleged KKK ties and other problems in the police ranks since 2010, when Elkins resigned after his estranged wife made his membership public.

Last week, residents were told Borst and the Hunnewells had been members of the United Northern and Southern Knights Chapter of the Ku Klux Klan, though its presence in their town wasn't noticeable. The Florida Department of Law Enforcement sent the police chief a report linking the officers to the Klan based on information from the FBI. Both men didn't return repeated phone messages to their homes, but Borst told the Orlando Sentinel he has never been a Klan member.

Ann Hunnewell – who was a police department secretary until 2010 – told Florida investigators that former police chief JM Isom asked her and her ex-husband to join the KKK in 2008, trying to learn if Elkins was a member. Isom, though, shortly after Elkins resigned, also quit after he was accused of getting incentive pay for earning bogus university degrees.

Current Police Chief Terry Isaacs said he took a sworn oath from Isom, who called Ann Hunnewell's account a lie, and that there was no record of such an undercover investigation.

The disclosure of the officers' Klan ties harkened back to the 1940s and 1950s when hate crimes against blacks were common. That era was chronicled in the 2012 book Devil in the Grove. Then-Lake County sheriff Willis McCall shot two of four black men, dubbed the "Groveland Four", who were dubiously charged with raping a white woman.

“Things have improved, of course," said Sannye Jones, a local National Association for the Advancement of Colored People official who moved to Lake County in the 1960s. "But racism still exists, just not in the same way. People are not as open and not as blatant."

Isaacs said three years ago, he inherited a police department of 13 full-time officers and five part-time officers – none of them black – that had a "lackadaisical culture”.

"I've taken great steps to overcome that. I've brought in diversity training for the officers and laid down orders that will get you fired," Isaacs said.

Hunnewell previously had been suspended for misconduct for the way he handled a case. Last year, he received five "letters of counseling" from supervisors for showing up late and writing reports incorrectly. He was promoted to corporal in 2012 but then demoted the next year for allowing personal problems to affect his job, Isaacs said.

"I felt he was beyond the point of being saved at this point," the chief said of Hunnewell's firing.

Cases the officers worked on also are under scrutiny. On Friday, prosecutors dismissed three cases — two traffic offenses and a misdemeanor battery.

The news about sworn police officers perhaps being part of the Klan doesn't sit well with many in Fruitland Park, which calls itself the "Friendly City," the mayor said. Adding to the influx of retirees, The Villages has plans to build housing for 4,000 residents, which would almost double the city's population.

"I'm shocked, very shocked," said Chery Mion, who lives in The Villages but works in a Fruitland Park gift shop next door to the mayor's office. "I didn't think that organization was still around. Yes, in the 1950s. But this 2014, and it's rather disconcerting to know."