The correct option is C had been
Let’s examine the sentence: “The police said he ____ arrested on several previous occasions.” All the verbs in the sentence are of past tense and the sentence states an action that was not occurring on a particular occasion but had occurred on ‘several previous occasions.’ So, the sentence talks about an action that was completed in the past. To convey this sense, the sentence requires verbs of past perfect tense. Past perfect tense indicates that an action was completed (finished or "perfected") at some point in the past before something else happened. This tense is formed with the past tense form of "to have," i.e. had, plus the past participle of the verb. Option D is the only choice containing the verb ‘had’ and so it is the correct answer.