Businessmen Thomas Scragg and Paul Phillips jailed for £34m fraud

The Johnson brothers and Scragg spent money on luxury hotels, cars and properties, police said

Two men who carried out a £34m tax and VAT fraud by laundering cash through the construction industry have been jailed.

Thomas Scragg, 56, of Solihull, West Midlands, and Paul Phillips, 60, of Derbyshire, set up numerous companies over five years as part of the fraud.

Carl and Anthony Johnson, 49 and 41, from Wolverhampton have also been found guilty of money laundering.

The men spent thousands on hotels, homes and expensive cars, police said.

Reporting restrictions around the case have now been lifted following the conviction at Birmingham Crown Court on Monday of the Johnson brothers.

'Flaunted wealth'

Scragg, from Hockley Heath, was jailed for a total of 17 years following three separate fraud convictions against HM Revenue & Customs (HMRC), one of the longest sentences in UK criminal history for fraud, West Midlands Police said.

Phillips, of Glebe House, in Ashbourne, was found guilty of conspiracy to cheat HMRC and money laundering and sentenced to nine years in prison in November 2010, police said.

The Johnson brothers laundered £2.4m and "flaunted their wealth for the local Wolverhampton community to see which is what ultimately led to their downfall", police said.

They installed state-of-the art security equipment in their homes. Carl Johnson had bulletproof glass put in his home in Bushbury Road and Anthony rebuilt his house on Sandy Lane, installing a cinema room, stables and dog kennels.

They also bought a Lamborghini Murcielago, Bentley Continental, Porsche Cayenne and Ferrari Spider, police said.

Their assets, including properties worth more than £2m, are now the subject of confiscation proceedings.

To carry out the fraud, Scragg and Phillips set up several payroll companies which dealt with construction work. They collected PAYE payments but did not pass them to HMRC.

Instead, the cash was passed to a second layer of fraudulent "payroll companies', HMRC said.

"These companies were used to channel the money, and provide distance from the fraud, by transferring it to a third layer of fraudulent companies, all dormant, set up purely to launder the funds for cash," the spokesman added.

"The workforce would be paid 'cash in hand' without any deductions being made and VAT for work carried out went unaccounted."

Det Ch Insp Shaun Edwards said the joint investigation took more than five years.

"This was an incredibly long and complex investigation using the combined specialist skills of officers from West Midlands Police, HMRC investigators, the Regional Organised Crime Unit (ROCU), Regional Asset Recovery Team (RART) and CPS lawyers, who have worked extremely hard throughout the inquiry.

"This was fraud and money laundering on a massive scale. It deprived the public purse of millions of pounds and Scragg's audacity is shown by the fact he continued the fraud in various guises even after he knew he was being investigated."

He said the Johnson brothers were heard to joke "crime does pay" but added that they were likely have plenty of time behind bars to reconsider that opinion.