Several well-known Winnipeg business people have been arrested for allegedly operating what is known as a cheque-kiting scheme, which falsely inflated their companies' bottom lines and defrauded investors of millions of dollars.

Police allege former principals of Maple Leaf Distillers and its parent company, Protos International, along with a senior manager of Astra Credit Union, engaged in a massive cheque-kiting scheme to defraud investors.

The arrests were made between March 11 and 13 and announced at a press conference Friday morning.

Police say cheque-kiting is a way of falsely increasing companies' financial bottom lines by transferring money between them.

Maple Leaf Distillers and Protos International have since gone out of business.

Police say that between 2004 and 2006, the individuals devised a scheme to obtain unauthorized credit from Astra Credit Union. They took advantage of what is known as "float time," the gap between when the financial institution recorded cheque deposits and when they cleared cheques written on their line of credit accounts, police said.

In the face of financial collapse, this scheme was set into motion to keep the financially distressed companies afloat in hopes of a potential sale to an international distilling company.

Cheques for more than $300 million were written and cycled among the companies, according to police. That enabled Maple Leaf Distillers and Protos International to fraudulently inflate the amount of money in their accounts, resulting in the financial institution granting them credit they were not entitled to, and in excess of their authorized limits, police allege.

The total financial loss suffered by Astra was in excess of $3.9 million.

Those arrested include David Wolinsky, 67, Clarke Culbertson, 56, David Mollins, 64, and Barry Milne, 48. Wolinsky is from White Rock, B.C., while the other three individuals are from Winnipeg. All are charged with fraud over $5,000 and conspiracy to commit fraud.

Culbertson is the former chief credit officer for Astra Credit Union. Astra is now facing a multimillion-dollar lawsuit from a group of investors who lost money.

The investors include former Winnipeg Jets captain Thomas Steen. Other high-profile investors included rock star Burton Cummings, Dickie-Dee ice cream magnate Earl Barish, criminal lawyer Hersh Wolch, Winnipeg Mayor Sam Katz and a host of doctors, lawyers and entrepreneurs from the city.