A giant contract to redevelop Devonport Naval Dockyard involving Halliburton, the group formerly run by US vice-president Dick Cheney, and Rolls- Royce, has become the subject of a fraud investigation.
Ministry of Defence police are probing accusations that a subcontractor on the scheme, McLaughlin's, has been charging for site workers who never existed. The value of the alleged fraud is believed to run into millions of pounds.
The project, which involves refitting the facility servicing Britain's nuclear submarines, is also believed to be running wildly over budget. Originally priced at £417m when it was awarded in 1995, the cost soared to £659m. The MoD is understood to have been told the scheme will now cost some £890m.
The developer is Devonport Management, a company owned 51 per cent by Halliburton, 24.5 per cent by Balfour Beatty and 24.5 per cent by Weir Group. The main contractor is the marine services side of Rolls-Royce.
A spokesman for Devonport Management said: "We take this seriously as it is the taxpayers' money involved."
Rolls-Royce issued a statement saying their managers had given MoD police "formal statements and supporting material as part of this on-going investigation".
No one from McLaughlin's was available for comment.
Halliburton, where Mr Cheney was chairman until 2000, is being investigated by the US Securities and Exchange Commission for accounting irregularities. It recently declared an annual loss of almost $500m (£320m).