McNally, who also lives Waterford, challenged Miller to a fight and threatened to "kick his ass," according to a criminal complaint filed by Miller.
McNally's attorney, Leo B. Dubler III, declined to comment Friday. Miller's attorney, Charles Fiore, also declined to comment.
The police department suspended McNally without pay Thursday night after a municipal court judge found sufficient evidence to charge him, said Waterford Lt. Daniel Cormaney.
The alleged barroom stand-off followed a series of lawsuits and countersuits involving Waterford elected officials and police officers in what the former mayor last year likened to an old-fashioned family feud.
On one side is a group of self-proclaimed whistleblowers who say that a clique of Waterford police has harassed and intimidated residents, including Miller, for at least a year.
On the other is a small group of officers led by McNally, who says he has been defamed by a website launched in 2010 that makes claims of police brutality and posts photographs of police out drinking. In one instance, an officer was hanging upside down from what appeared to be a stripper's pole.
When McNally sued last summer to have the site taken down, he named Maryann Merlino, now the mayor of Waterford, as a conspirator. The anonymously maintained site is still active.
"There's quite a bit of litigation going on," Merlino said. "I pray that it's going to come to an end soon."
Set amid farms and orchards on the edge of the Pine Barrens, the town of 10,500 residents is filled with towering oaks and front-porch swings. It looks like a Norman Rockwell painting.
But between personal gripes and hardball campaigns for local political office, life in Waterford has been far from serene, say residents.
"It's been a mess back and forth," Cormaney said. "It's a real shame."
Contact James Osborne at 856-779-3876 or firstname.lastname@example.org, or follow on Twitter @osborneja.