Investors stung in defence firm 'scam'

British investors have lost millions of pounds to bogus defence companies created by a gang of American conmen.

Authorities in the US say that the fraudsters exploited their victims' patriotism by telling them they were helping to fight terrorism and support the allies in Iraq.

But instead of buying shares in defence companies that included the makers of the Tomahawk cruise missile, the £30 million fund was used to buy a luxury yacht, Mercedes cars and a valuable painting.

At least 170 investors on both sides of the Atlantic were duped by the gang from New Jersey, who placed advertisements in Jaguar Magazine for their Clover Management Group, which claimed to be supplying defence equipment to the US government.

Investors paid an average of £160,000 each to buy shares in the bogus companies.

US investigators filed charges against the men - Carmine and Thomas Russo and Mario Figueroa - in February, but kept details secret while Scotland Yard followed up the case in Britain.

The Metropolitan Police said that a 34-year-old man had been arrested in London and bailed to appear later in connection with the alleged scam.