A federal lawsuit filed by the previous Muncie Police Chief confirms details of the FBI probe into possible corruption in Muncie city government and seeks damages from the City of Muncie and Mayor Dennis Tyler.

Former Chief Stephen Stewart alleges that Tyler and Democratic party figure Phil Nichols repeatedly asked Stewart to conduct an MPD investigation of a city employee who was believed to be cooperating with the FBI's investigation.

RELATED: FBI serves search warrant at Muncie City Hall

In the lawsuit, Stewart says Tyler became aware that a "long-time" city employee was possibly cooperating with the FBI in it's investigation of corruption within the City of Muncie. After the employee was fired, Tyler told Stewart the employee had committed "crimes," but Tyler was unable to give any evidence, according to the lawsuit. 

Stewart told Tyler if he had any incriminating evidence to turn it over to police. Tyler later called Stewart and said the employees computer contained evidence of "criminal activities." Stewart had the employees computer taken into police evidence room. 

Sarah Beach, a employee of Tyler, came to Stewart's office with a large stack of "hundreds, perhaps thousands" of emails saying it contained evidence of the "possible crimes," but did not identify anything specifically. 

According to court documents, Stewart was "immediately concerned" with the ethical and legal issues raised by the Mayor's Office request for an investigation. Stewart spoke with another "high-ranking" official and both agreed it would be "unethical and inappropriate" to investigate a former employee cooperating with the FBI. 

The FBI later contacted Stewart requesting the emails. Stewart turned over the emails to the FBI and informed Tyler that he had done so. Tyler began asking when the FBI was going to come get the computer. Stewart learned that a MPD officer had been instructed to make an "exact copy" of the computer so Tyler would still have access to the computer if and when it was seized, per the lawsuit. 

In the late spring or early summer of 2016, Tyler requested a meeting with Stewart and two other police officers. In the meeting, Tyler told Stewart an investigation was "necessary" and requested Stewart to investigate the former employee. 

After the meeting, Stewart spoke to one of the officers in attendance and both were "equally uncomfortable" with the requested investigation. 

A week later, the officer met with officials from the FBI. After the meeting, Stewart asked if the FBI wanted help with the investigation to which they replied, "Thanks for the offer, but no thanks."

During the summer of 2016, Tyler "pressured" Stewart to investigate the employee "with the implicit understanding that to do otherwise was grounds for removal and/or termination," according to the lawsuit. Each time Stewart told Tyler it would be "unethical and inappropriate" to interfere with the FBI investigation, according to court documents. 

In September 2016, Stewart was requested to attend a meeting with Tyler and Phil Nichols. During the meeting Phil Nichols "yelled and screamed" at Stewart that he was going to conduct an investigation. Later that day, Stewart and two police officers attended another meeting with Phil Nichols and his attorneys, according to the lawsuit. 

Phil Nichols again asked Stewart if he was going to conduct and investigation. According to court documents, Stewart said he would not conduct an investigation and Phil Nichols told Stewart there would be a meeting in the morning and he "would not like the outcome of that meeting."

Stewart and his fellow officers left the meeting "thinking Stewart was going to be fired as Police Chief," according to the lawsuit. 

On Sept. 2, 2016, Stewart resigned as chairman of the local Democrat Central Committee. Stewart was asked to come to a meeting with the Deputy Chief and Tyler where an investigation was again requested. 

Over the next seven weeks, Tyler continued to "periodically" request that Stewart conduct an investigation of the former employee, according to court documents. 

On Oct. 30, 2016, Stewart learned that Tyler had asked an individual to make false allegations against him. A day later, Stewart submitted his resignation as chief of police and returned to his position as sergeant. 

RELATED: Muncie police chief resigns

Tyler did not like Stewart's letter of resignation and told Stewart that he would "pay for this." Stewart submitted his letter of retirement on Nov. 1, 2016.

The lawsuit seeks unpaid wages and punitive damages. 

This lawsuit comes after the FBI served a search warrant in January at Muncie City Hall and in February, Muncie's building commissioner, Craig Nichols, was arrested. Craig Nichols was charged with 16 counts of wire fraud, one count of theft of government funds and 16 counts of money laundering.

RELATED: Building commissioner put on unpaid leave after yesterday's arrest

Former building commissioner Craig Nichols is the son of Phil Nichols who is mentioned in Stewart's lawsuit. 

In a statement to the Daily News,  Stewart's attorney said: 

“After dedicating his entire law enforcement career to the City of Muncie, Mr. Stewart was forced to resign when he refused to cross the line between the good guys and the bad guys. And for upholding the law, he was denied the compensation and benefits to which he was entitled.”

The Daily News has reached out the Mayor's Office and they said they can not comment on pending litigation. 

This story will be updated.