James McLaughlan, 58, from Ayrshire who appeared before Southwark Crown Court admitted to conspiring to defraud the MoD out of £424,923.
McLaughlin who ran the company McLaughlan's Scaffolding carried off the scam by creating a "ghost workforce" that were supposedly working on upgrading a nuclear submarine facility at Devonport Dockyard in Plymouth.
The swindle saw "dead workers" being paid £27,000 a week.
McLaughlin's stepdaughter, Rebekah Hart, 28, from Surrey and Robert Burns, 38 from Ayrshire as well as Christopher Ackerman, 33, from Plymouth, were also charged with fraud offences in March.
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Hart who worked for her stepfather's company pleaded guilty to two sample counts of false accounting while the company's site manager, Burns who was the scaffolding company's site manager and Ackerman who worked for Jordans Engineering Ltd were found guilty of conspiracy.
Hart was handed down a two-year conditional discharge while Burns has been sentenced to 18 months behind bars. His co-conspirator, Ackerman was jailed for 12 months.
It is reported that McLaughlan bribed Ackerman to the tune of £15,000 and also supplied him with laptop computers and a deposit for a house.
Hart falsified clocking-in cards inflating the hours of work while ensuring that staff received their correct pay.
Judge Nicholas Loraine-Smith presiding over the case said that "the audacity of the fraud was astonishing" and that "it was an environment which was ripe for printing money but they did not have to print the money".
Paul Garlic, QC, prosecuting said that McLaughlan was both "manipulative and bombastic and corrupted others into taking part".
The fraud investigation began when MoD police received an anonymous tip-off.
The trial lasted three months.
(DS)
