A central Illinois businessman was arrested and charged yesterday with attempting to sell at least $385 million in worthless Peruvian securities that he allegedly represented as having the backing of the U.S. government, government officials said yesterday.

Kenneth D. Hocking, 78, president of the now defunct International Industries Development Corp. of Mattoon, Ill., had falsely obtained the notes in the 1960s while promising to build low-income housing projects under a U.S. Agency for International Development (AID) loan program, according to a criminal complaint filed by the U.S. attorney for central Illinois.

Although the projects never received government approval, Hocking marketed the notes in investment packages that he claimed were guaranteed by AID, the government charged.

Federal officials also said they believe that they haven't recovered all the phony securities.

"We're very concerned that there are a lot of these notes out there on the streets, in bank portfolios and in people's accounts and that people are getting loans based on them," said one federal official, who asked not to be identified.

A Secret Service official, who worked on the case along with the U.S. attorney in Illinois and the AID inspector general's office, called it the "largest financial document investigation, in terms of money, in which the Secret Service has participated."

Hocking did not enter a plea to the charges yesterday, and his lawyer could not be reached for comment. A federal judge ordered that he be committed to a federal facility for tests to determine if he is mentally competent to stand trial, according to Frances C. Hulin, assistant U.S. attorney.

Government officials said Hocking's alleged actions represented an attempt to profit from AID's Housing Guarantee Program -- a program that backs about $150 million in loans each year for the construction of low-income housing in developing countries.

In 1966, Hocking obtained securities from eight Peruvian cooperatives to build housing projects in that country and then submitted proposals to AID under the program, according to a government complaint. But, the complaint charged, the proposals were rejected by AID, and no housing was ever built.