An army of ghost workers was created in a £500,000 scam by the boss of a company involved in a huge Ministry of Defence contract to upgrade a nuclear submarine facility.

James McLaughlan, his stepdaughter and two others who benefited from the swindle are facing prison after convictions at the end of a three-month trial.

Steve Fraser, of the MoD Police, which carried out a five-year investigation, said that the £424,923 stolen by McLaughlan and his co-conspirators would otherwise have been spent on the Armed Forces.

“These convictions should act as a warning to others that we will root out corrupt practices and bring those responsible for defrauding the Ministry of Defence to justice,” he said.

The first public indication of a giant swindle at Devonport dockyard, which repairs and refuels the Royal Navy’s nuclear submarines, emerged in a report by the National Audit Office in 2002. McLaughlan, 58, the boss of Scaffolding Ltd, made so much money that he celebrated with a lavish office Christmas party and distributed gifts all round.

Over 15 months McLaughlan, of Kilwinning, Ayrshire, created 58 non-existent scaffolders who, he claimed, were working shifts at the Devonport site. The ghost-worker scam was so blatant that even when everyone went on strike, he still put in claims for full shifts. In other cases, genuine workers, unbeknown to them, had their hours inflated. Later the police found that 287 of the workers paid by the MoD were “ghosts”. Rebekah Hart, McLaughlan’s 28-year-old stepdaughter, whose undergradute boyfriend was one of the “ghosts”, pleaded guilty to two cases of false accounting.

Robert Burns, 38, the company’s site manager, from Ardrossan, Ayrshire, was found guilty of conspiracy. He had admitted clocking in cards for others but claimed that it was for legitimate reasons when workers were delayed by security checks.

Also convicted of the conspiracy was Christopher Ackerman, 33, of Plymouth, who was an assistant quantity surveyor at Jordans Engineering. The court was told he received a series of backhanders for “turning a blind eye” to the scam, including £3,000 in cash, a £1,500 laptop, nine months’ free accommodation and a couple of cars. He claimed that the bribes were just gifts, and that if he was guilty of anything it was stupidity in trusting McLaughlan.

Mark Burns, 34, of West Kilbride, Ayrshire, Matthew Gillies, 28, of Troon, Ayrshire, John Tibbetts, 43, from Paignton, Devon, and Kevin Watkins, 60, from Pembroke Dock, Pembrokeshire, were acquitted of involvement in the conspiracy.

The four convicted, who are on bail, will be sentenced on April 29.

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