(CNN) -- The mayor of Nogales, Arizona, was arrested Tuesday on charges he took bribes to protect contracts or obtain business contracts with the city, the state attorney general said.
Octavio Garcia-Von Borstel, 29, of Nogales, was arrested at his office at city hall, according to the Arizona attorney general's office, which announced the arrest and an indictment on state charges. Search warrants were executed at the mayor's home, business and city hall office.
The mayor is also accused of money laundering, conflict of interest, illegally conducting an enterprise and fraud.
The mayor's father, Octavio Garcia Suarez, 59, of Nogales, also was indicted and arrested. He faces several charges that include fraud, theft and money laundering, the attorney general's statement indicated.
"Both the mayor and his father will be held accountable and prosecuted to the full extent of the law." Attorney General Terry Goddard said.
A spokeswoman for the city said Garcia-Von Borstel, who has been in office since April 2008, was taken into custody around 9:30 a.m.
Santa Cruz County Justice Court Judge Mary Helen Maley set bond at $250,000, a clerk said later Tuesday. The mayor's next hearing was scheduled for October 4.
The Federal Bureau of Investigation's Southern Arizona Corruption Task Force assisted in the investigation in the border city. FBI spokesman Special Agent Manuel Johnson in Phoenix would not elaborate on the case.
According to the statement, FBI agents began investigating Garcia-Von Borstel five months ago and determined that he was soliciting Nogales businesses to hire him as a business consultant as early as February 2009. At least one business admitted to the FBI that it was paying the mayor to use his official position to obtain business contracts and, specifically, to obtain new city of Nogales contracts, the attorney general stated.
Further investigation determined the mayor also received money from at least one business in exchange for utilizing his official position to protect a contract the business owner had with the city and to assist the business owner in obtaining an additional city contract, added Goddard, who is running for governor.
The indictment cites $4,000 and $2,000 payments, without providing details.
The mayor's father, Garcia Suarez, was an agent for Western Union authorized to sell Western Union money orders from his money transmitter business, ACE Cash Express, in Nogales, officials said. The state alleges that Garcia Suarez fraudulently reported that Western Union money orders worth $3.2 million were sold, although there were no cash deposits to back them up.
The money orders were then cashed by Garcia-Von Borstel and deposited into a bank account he controlled, the statement said. Of the $3.2 million, the father and son withdrew $565,000 for their personal use before the account was frozen, it said.
A phone message and e-mail to the mayor were not immediately returned.
CNN's Phil Gast and Amanda Watts contributed to this report.