FOUR North-East company directors involved in a £17m mobile phone scam were jailed last night.

Businessmen Michael McGuiness, Leslie Heads, Darren Bell and Peter Levitt laundered cash from the fraud against the taxman.

The defendants, who became involved because they wanted to make money for nothing, were part of a wider circle of criminals who imported mobile phones worth £68m from Europe.

The phones were sold to UK companies - making £2m in profits - but no tax was paid on them.

As well as the profits made on the phones, customs officials said the gang also owes £17m in unpaid VAT - and the four North-East men now find themselves liable for the lot.

Teesside Crown Court heard how cash from the sale of the phones passed through two established companies - Teesside Transport Management Services (TTMS) and Chicane Traffic Management UK Ltd.

But because the sums were so large, two new companies, called Main Attack and Baycrest Ltd, were set up to gain VAT registration numbers and to move the cash.

Using these shell companies, millions of pounds were sent around the world, to places as far as Pakistan and Hong Kong.

The scam was the idea of a successful North-East businessman who The Northern Echo is prevented from naming, and who was only referred to in court as Mr X.

Ironically, prosecutors have been unable to bring a case against Mr X because the fraudulent paper-trail led directly to the four company directors. Lawyers admitted he had covered his tracks and told the court he had got away scot-free.

Peter Collier, prosecuting, said in order for the scam to work, Mr X and others needed companies in the UK with VAT registration numbers.

They used company paperwork, including invoices and the VAT numbers, to sell the phones to UK companies.

The price always included VAT, but the tax was never paid to customs and excise.

Yesterday, the four company directors pleaded guilty to money laundering the profits during 2002.

They are also now liable to re-pay the £17.5m owed in tax, because their company details and invoices were used to sell the phones.

Mr Collier said: "Their offences are one arc of this type of fraud. The defendants have admitted by their pleas they were allowing their companies to be used in an unlawful manner."

He said McGuiness, an accountant and director of TTMS, was approached by Mr X and asked if he was interested in making extra money. When he said yes, the scam began.

The 37-year-old director, whose company had financial problems, then enlisted the services of his best friend, kitchen fitter Bell, and persuaded him to become a company director of a new firm, along with Leslie Heads.

Security firm manager Levitt was also told he could make easy money by becoming a company director.

Defence barristers for the men said Mr X, who the directors were told had criminal connections, then used the business details to carry out the fraud.

The court heard insufficient evidence could be gathered against him because all the paperwork was in the name of the companies and the directors.

Defence barrister Alistair MacDonald said: "This person has escaped scot-free and has left those in the dock to face the consequences of what happened."

Judge Guy Whitburn said he accepted that the defendants did not know where the £17.5m had gone, and for what purpose it was being used.

He said: "You all succumbed to the temptation of easy money, dirty money."

McGuiness, of Cranbourne Drive, Redcar, was jailed for four years and ordered to pay £75,000 legal costs and £26,000 he was paid from the profits.

Bell, 35, of Coach Road, Brotton, east Cleveland, was jailed for 12 months and ordered to pay back £6,000.

Levitt, 58, of Stokesley Road, Hartlepool, was jailed for 12 months and told to pay £1,600, and Heads, 47, of Springfield Grove, Ingleby Barwick, Teesside, was jailed for 15 months, and ordered to pay £24,700 in profits