A New Zealander wanted for his role in an international money-laundering and investment scam that cheated hundreds of investors in this country and overseas is believed to be hiding in the Middle East.

Wayne Leslie Davidson, 63, was the New Zealand connection in a US-based, four-man money-laundering and investment fraud involving the sale of bogus railroad bonds and "obscure" pre-revolution Chinese Government bonds, United States prosecutors say.

The scam ran for about five years to 2003, catching 400 New Zealanders, 50 Australians and 25 Americans.

Losses to investors totalled US$4 million ($6.2 million).

Davidson is the only remaining fugitive after two accomplices - Steven Fishman, 59, of California, and Joseph Thornburgh, 61, of Oklahoma - were convicted in Oklahoma last week.

A fourth accused - Robert Searles, 71, of Tennessee - pleaded guilty to conspiracy to commit money-laundering in April.

Investors - many described by prosecutors as "sheepfarmers in New Zealand" - were told the bonds were risk-free and had astronomical values.

The railroad bonds were claimed to be backed by the US Government and rail company Amtrak, and included bonds issued by the Galveston, Houston, and Henderson Railroad - which raised funds to start building tracks in 1853. The company folded in the 1870s.

The men claimed the bonds could be used to obtain lines of credit from European banks, which could then be used in high-yield investment programmes to reap millions of dollars. The bonds were in fact worth no more than their value as collectors' items.

Victims had invested amounts ranging from $1500 to $15000, though many invested far more, Charles McLoughlin of the US Attorney's Office in Tulsa, Oklahoma, told the Herald yesterday.

Davidson was "running around the [New Zealand] countryside having meetings with individual farmers" allegedly telling them he could solve their financial problems "in short order", Mr McLoughlin said.

Davidson is now believed to be hiding in Dubai after leading US investigators on a chase through Spain, Britain, Belgium and Nigeria.

"He has been hopscotching. I think he left New Zealand towards the end of 2002," Mr McLoughlin said.

"He went to Hong Kong ... he caused some trouble there.

"He has basically been on the run since 2002."

US authorities were "actively trying to pursue" Davidson.

Arrest warrants and Interpol "red notices" had been issued and embassy-based FBI agents were keeping an eye out for him, Mr McLoughlin said.

"We are going to pursue Mr Davidson and bring him to justice."

He believed the charges, if proven, could see the former Wanganui bankrupt imprisoned for up to 20 years.

Davidson's co-accused are due to be sentenced in the next couple of months.