DOZENS of struggling families promised a financial lifeline were left in even more trouble by three crooked businessmen who masterminded a £500,000 con.

A court heard yesterday how the friends set up a debt management company to help people in financial difficulties, but instead stole from their customers to fund their lavish lifestyles.

John Paul Peers, Mark Robson and Saul Jeffries promised to negotiate with banks and loan companies to reduce the amount debtors had to repay.

But instead of deducting only their fee from customers' monthly payments and using the rest to settle their debts, the three men pocketed all of the cash they were given.

A police investigation revealed there were at least 54 customers who paid the company, which twice changed its name, more than £126,000.

But detectives believe the four-year con - taking into account the money defrauded from financial institutions - could have amounted to about £500,000.

Details of the case can now be reported after Peers' girlfriend, Holly Strutt, walked free from court when the case against her was thrown out by a judge.

Miss Strutt was accused of knowingly using criminal property - spending tens of thousands of pounds her 35-year-old boyfriend had obtained during the fraud.

But Judge Les Spittle yesterday ruled there was not enough evidence to prove the 28-year-old former holiday rep knew where the cash had come from.

Now Peers, 32-year-old Robson, and Jeffries, 28, face jail sentences after they pleaded guilty earlier this week to charges of conspiracy to defraud customers of Milano Debt Management, Brunswick Debt Management and Money Management, between June 1999 and September 2003.

Jeffries, of Christchurch Place, Peterlee, east Durham, and Peers, of Westwood Lane, Ingleby Barwick, near Stockton, also admitted conspiracy to defraud financial institutions between the same dates.

Robson, of Mapleton Drive, Stockton, admitted a further count of using criminal property - the cash obtained by deception from customers - between August 2003 and January last year.

Peers pleaded guilty to the same charge, but with the dates ranging from December 2004 to October last year.

Before Judge Spittle brought a halt to the trial at the end of the prosecution case, a jury was told of the exotic lifestyles enjoyed by Miss Strutt and her boyfriend.

The couple had holidays to Mexico twice, Egypt, Ibiza, India twice, Spain, Gran Canaria, and took a two-month tour of southern Europe, all at a time Peers was not working.

Some of the overseas trips were even made after Peers had been arrested on suspicion of conspiracy to defraud and Miss Strutt for alleged money laundering.

When she was asked where the money was coming from to fund the expensive holidays, Miss Strutt told detectives she thought it was from Peers' savings and from property deals.

The couple met in 2003 in Ibiza where Miss Strutt worked for a travel firm, and started courting the following year when Peers returned to the holiday island.

After returning to her native Hertfordshire the following year, Miss Strutt, who was said to be from a wealthy family which owned a private jet, moved to the North-East to be with Peers.

She told police she thought he was a successful businessman, who had recently worked as a financial advisor and had a sunbed shop as well as a florist and hairdressers.

The court heard that Peers, who was brought up on a council estate in Stockton, had developed a liking for expensive designer clothes, cars and overseas travel.

As well as his four-bedroomed detached house in Ingleby Barwick, he also owned two properties in the Hardwick area of Stockton and a flat in Peterlee before Miss Strutt moved north.

Peers had bought the homes from Stockton Borough Council for a combined £16,750 using "tainted" cash and sold them in 2005 for nearly £120,000, the court heard.

He bought a £30,000 house in Patterdale Street, Hartlepool, at an auction in January 2005 after the couple set up a business account for a property company.

Miss Strutt spent £13,000 from savings and a credit card renovating the house, but the couple made a loss on the venture when they received only £40,000 for it.

They were first arrested and interviewed in June 2005, but were released until October last year while investigators tried to unravel the paper trail of the debt management companies.

In the meantime, the couple had a number of holidays and continued to "spend, spend, spend", said Michael Smith, prosecuting.

Miss Strutt insisted she had no idea the money they were using had been gained through the crooked companies, and said she had not been warned by police against spending further.

The couple were eventually charged in January, and were due to face a trial lasting four weeks, along with Robson and Jeffries, at Teesside Crown Court on Monday.

The two other men entered guilty pleas on the first day, while Peers pleaded guilty to the charges he faced on Wednesday after legal problems forced a delay in the case.

Following the opening of the case against Miss Strutt yesterday, her legal team, led by Joanne Kidd, successfully applied to have the prosecution halted on the grounds of "vague" evidence.

The three men will be sentenced within the next month.