Pair Indicted in $2-Billion Bond Fraud Case in Guam

A Wall Street investment banker and a Canadian national were indicted by a federal grand jury in Guam on Thursday in a $2-billion bond fraud scheme that a federal prosecutor called “one of the most outrageous and complex frauds ever perpetrated.”

The grand jury indicted Arthur A. Goldberg, executive vice president of the underwriting firm Matthews & Wright Group Inc., and naturalized Canadian Frederick Mann. The indictments cap a year-long investigation of the small New York company’s handling of a $300-million Guam housing bond issue in 1985.

Goldberg and Mann also were were charged with bribing former Gov. Richardo Bordallo of Guam to get his support for the $300-million Guam housing bond issue in 1985, the FBI said. The bond issue was underwritten by the firm Matthews & Wright, of which Goldberg is principal stockholder, the bureau said.

The indictment also alleges fraud that caused the collapse of a $400-million industrial development bond issue by the government of Palau in the Western Pacific and an $80-million housing bond issue by the Commonwealth of the Northern Mariana Islands north of Guam.

Bordallo, defeated in his re-election bid following his indictment last year, was convicted Feb. 13 in federal court in Guam on 10 counts of bribery, extortion, witness tampering and conspiracy to obstruct justice.

He was sentenced to nine years in prison, but is free pending an appeal.

The investigation that produced charges against Bordallo, numerous members of his Administration and several Guam businessmen led to the year-long investigation of Goldberg and Mann, the Federal Bureau of Investigation said.

The indictment alleges that Goldberg and Mann channeled $70,000 in bribes to Bordallo’s re-election campaign for his approval of the Guam issue.

The indictment also charges that Mann and Goldberg obtained a substantial amount of the money they paid Bordallo by defrauding a development fund established by the Guam Legislature to support Guam developers’ efforts to build housing.

Goldberg and Mann obtained the funds in various ways, including bogus billings that were submitted to and paid by the fund, the FBI said.

“The defendants used bogus feasibility studies, a shell offshore bank which had lost its license, bogus checks and bank accounts, and worldwide wire transactions to promote a nationwide fraud involving more than $2 billion in municipal bonds,” according to the charges, the FBI said.

The grand jury charged that these bonds were promoted by Mann and Goldberg to generate money for themselves. No projects or housing were ever built, the FBI said.

Goldberg and Mann were charged with 52 counts of mail and wire fraud, interstate transportation in aid of racketeering, conspiracy and bribery involving federal programs, the FBI said.

The indictments did not name the firm Matthews & Wright.

Mann, whose whereabouts are currently unknown, is also known as Dr. Mann and Manfred Lothar Mann. He is a naturalized Canadian born in Germany, and according to Canadian Court record, was convicted of fraud and swindling a widow out of $70,000 in 1984.

Goldberg, who lives in New York, will be summoned to appear in federal court in Guam on Jan. 15 to face the charges, the FBI said.

If convicted on all counts, Goldberg and Mann would each face up to 265 years in prison and fines of $13 million, the FBI said.