A MULTI-MILLION pound fraud investigation is being centred on companies in the North-East.

The probe was launched by Cleveland Police after allegations that almost £6m of public money was siphoned from a scheme aimed at providing training for adults.

Police say the activities of up to nine firms on Teesside are expected to be examined in what is thought to be the biggest fraud investigation ever mounted in the region.

A seven-member team from the Fraud Squad will look into alleged abuse of Individual Learning Accounts (ILAs) across the country and the role of the National Distance Learning College.

Individual Learning Accounts were set up by the Government in 2000 and were open to everyone aged over 19, with each person registered being allocated £200 to put towards the cost of a training scheme.

The cash was given to training providers by the Government but the following year it was axed when the Department of Education and Skills concluded it was not working.

The National Distance Learning College (NDLC), in Borough Road, Middlesbrough, encouraged students to use the Government's ILA programme.

Considered to be one of the UK's biggest providers, it employed 100 people on Teesside and had a branch in Ireland.

NDLC and the associated group Fiche and Chips, which supplied reconditioned computers to people, were both part of the Thanx Group.

The Thanx Group marketed the college courses nationwide, and the mailshots which promoted the courses also advertised the computers.

Fiche and Chips went into liquidation in October 2001, following hundreds of complaints about computers failing to arrive, or being substandard.

Middlesbrough Council also secured a county court injunction forcing Fiche and Chips to comply with regulations, accompanied by a warning that a breach of the injunction could result in the directors being jailed.

The NDLC went into receivership in November 2001, the same month the Government scrapped the ILA scheme amid allegations of widespread abuse.

Thanx Group chairman Mike Smallman, now believed to be in Spain, said the group refunded disappointed Fiche and Chips customers more than £1m.

Complaints have been made to the police by the Department for Education and Skills against a number of organisations, including one learning provider with about 100,000 students on its books.

The police team is expected to take up to three years to complete inquiries into the disappearance of the money.

Detective Sergeant Phil Murphy, of Cleveland Police fraud squad, said: "This is a wide-ranging and extremely complex inquiry, and we believe it is the biggest fraud investigation ever carried out in the North. We suspect at least £5.8m of Government funding has gone missing.

"We are working with the Official Receiver, the Department of Trade and Industry, various accountancy firms, a forensic accountant and examination and accreditation boards.

"The ILA system was wide open to unscrupulous and dishonest training providers who developed many different methods to defraud millions from the public purse."

Mr Smallman could not be contacted for comment last night