Businessman jailed for £16m student fraud

The owner of the biggest learning provider in the UK used the money to fund a lavish lifestyle of racehorses and gambling, a court heard.

Michael Smallman, 45, of Leeming Lane, Northallerton, North Yorkshire, used the money to fund a lavish lifestyle of racehorses and gambling, Teesside Crown Court heard.

His wife Angela, 41, also of Leeming Lane, was found guilty of money laundering and sentenced to 15 months.

Two other defendants, company directors Peter Kenyon, 43, of Roseberry Road, Great Ayton, North Yorkshire and John Hornsby, 59, of East Close, Sadberge, Darlington, in County Durham, were cleared of fraudulent trading.

Smallman was the owner of the biggest learning provider in the UK - Middlesbrough's National Distance Learning College (NDLC) - to which he lured tens of thousands of students to enrol on courses that would not lead to a recognised qualification.

The court heard Smallman tempted 80,000 students to sign up for his home study courses, netting him £10 million in just 15 months.

But only 18 of the would-be graduates ended up with a genuine qualification when they finished their studies.

Between September 2000 and November 2001, Smallman's company was running a massive fraud, cheating the students and the Government by offering inadequate training, refusing to refund students who chose not to go ahead with the course, and claiming the qualification was accredited by the City and Guilds of London Institute when it was not.

Smallman also cheated the Government out of £6 million by claiming education grants intended to help students with the course fees.

He took £200 for every student in the form of Individual Learning Account grants, and used only £150 of that sum to pay the tuition fees.

Instead the fraudster channelled funds into his private interests, using the money to lead the life of a millionaire.

He spent £2 million on a TV production company and splashed out £1 million indulging his passion for horseracing by buying more than 40 horses.

He gambled away another £300,000 and splashed out £600,000 on home improvements.

But it all came crashing down when the Department for Education and Skills (DfES) complained to the police.

A six-year investigation followed, and Smallman was convicted of three counts of fraudulent trading and one of money laundering in October after a four-month trial.