THREE people were jailed yesterday after what at first appeared to be a single instance of housing benefit fraud turned out to be a £1.25m scam.

A three-year investigation revealed that the fraud in Whitby, was only the tip of the iceberg and officers discovered a huge operation to defraud the benefit system and credit facilities.

Last night, a man from Durham City and a man and woman from Sheffield were beginning long jail sentences.

The inquiry began in July 2007, when Detective Constable Neil Jefferson started investigating a possible benefit fraud in Whitby.

He uncovered a link with Sheffield and a team from South Yorkshire Police’s fraud squad, which eventually led the case, found several false names were used to fraudulently obtain benefits, credit and store cards, and other credit facilities.

Inquiries led to raids on three homes in the High Green area of Sheffield, including one that had been stripped bare – except for a loft filled with filing cabinets and shelving containing details of dozens of false identities.

David Smith, 56, and Susan Clarke, 49, who lived next door, were arrested, along with Dennis Morris, 56, from South Road, Durham City.

The three pleaded guilty to a range of frauds between 1995 and December 2008. Smith and Morris also admitted conspiracy to conceal the proceeds of crime.

At Sheffield Crown Court yesterday, Morris and Smith were each jailed for four years for fraud. Clarke was given 21 months.

Smith was also given five years’ concurrent for possession of a firearm and 18 months’ concurrent for possession of a CS gas cannister.

Detective Sergeant Aaron Day, from South Yorkshire’s fraud investigation team, said the loft office contained files of false names with details such as employment history, salary, false national insurance numbers and false wage slips.

“There was enough information in these files to create a full false identity on the electoral roll and false driving licences.

“It’s fair to say this was a fulltime occupation for the accused and over a period of years, they obtained £1.25m.”