TWO North-East businessmen were kidnapped and tortured by masked gunmen who posed as Customs and Excise officers.

The pair were told they would be executed - and their families murdered - unless they handed over £600,000.

German-born Volker Kappler, 37, appeared at Teesside Crown Court yesterday accused of kidnapping and blackmailing the pair. He denies the charges.

The jury heard how the kidnappers masked their victims, who were from Teesside, and beat them before driving them to north Wales.

Once there, they put guns to their heads, threatened to slice off an ear with a knife and vowed to kill one of the victim's children before raping and killing his wife.

Jury members were told that Mr Kappler, of Mold, north Wales, threatened to reveal details of an alleged tax scam by the victims if they didn't pay him the money.

Kappler hatched the plot because the two men were business partners of another man, from County Durham who allegedly owed him money.

Peter Johnson, prosecuting, said both the businessmen, who cannot be named for legal reasons, were at a factory when the gang entered on Friday, March 14.

A gang member attacked one of them with a baseball bat, before pillows were placed over their heads, he said.

They were allegedly driven to Mold, told to strip and given replacement clothing. They were then allegedly taken into another factory and separated.

The court heard how a gun was put to one man's head and he was asked by Mr Kappler where his money was. A knife was placed to his ear and one of the gang threatened to cut it off if he didn't speak.

An object that appeared to be a gun was put to the back of his head and a count down was started until he spoke.

Later, the man was told that if the money was not paid his children, and their cousins would be killed, and his wife would be raped before she, too, was murdered.

Eventually, both men were taken to a field near the Wirral, on Merseyside and abandoned. Wet and cold, they managed to find a telephone box and, nearly two hours later, at 11pm, were picked up by a passing policeman.

Mr Johnson said the pair told police they were beaten up but were too afraid to give further information at first.

After being returned to the North-East, one of the men was taken to hospital, where he received treatment for a head injury.

The other ordered a transfer of £600,000 from an account in Dubai to an account of Mr Kappler's at 5am the next morning.

But after having second thoughts, the two men decided to cancel the payment and go to the police. The gunmen have never been traced.

Mr Johnson added: "Mr Kappler felt he was owed money by a business associate of these two men. He was prepared to go to extreme measures to recover it by commissioning a professional gang of armed, ruthless men to 'put the frighteners' on the men in order to make them pay up."

The court heard how the gang wore uniforms because both the businessmen were being investigated for their part in an alleged VAT scam involving Customs and Excise.

The businessmen and their friend in County Durham were accused of inflating invoices allowing them to reclaim VAT for exported goods.

The court heard the men were blackmailed for their part in that alleged scam and that Mr Kappler knew one of them had recently received £338,000 and another £474,000 from VAT tax officers.

Mr Kappler, who is charged with two counts of kidnap and two counts of blackmail, denies all the allegations.

The case continues.