A US company has charged £1million for the 'services' of four 'forgotten' hostages, who have been held in captivity for more than a year (picture posed by model)

A private security firm that employs four of the 'forgotten' British hostages held in Iraq for more than a year has charged about £1million for its 'services' while they have been in captivity.

The company, which earns millions of pounds a year protecting British diplomats in Iraq, also has no kidnap and ransom insurance - meaning there is no guaranteed money available to secure the men's freedom.

The claims, in a US court case, come weeks after the men's families broke a year-long news blackout imposed by the Foreign Office to highlight their plight. 

The four men, who work for US-based Garda World, were protecting British IT consultant Peter Moore, who was installing anti-corruption software at the Iraqi finance ministry, when they were seized by armed men in police uniforms. The five were driven towards the Shia enclave of Sadr City. Little has been heard of them since.

Now a lawsuit filed by Garda World against ex-Parachute Regiment officer Paul Wood, who was head of its security operations in Iraq at the time of the kidnapping, raises serious questions about the affair.

Mr Wood was sacked this year and is being sued for allegedly using insider knowledge to set up his own security business. But in documents filed at the US District Court in Alexandria, Virginia, Mr Wood claimed he was planning to leave.

And Mr Wood also said he and his boss, Garda World president LeMarque Sheppard, 'did not see eye to eye... and the tension between the two heightened' when the four security staff were seized in Iraq.

He added: 'A significant problem was Sheppard's failure - before the hostages were taken - to obtain kidnap and ransom insurance for the affected security operators and their peers.'

Kidnap and ransom insurance would normally pay for a hostage negotiator to work full-time on securing someone's release. Mr Wood told the court: 'The lack of kidnap and ransom insurance has affected, and will continue to affect, the company's analysis of whether to make financial payments for information regarding the hostages, and whether and how much ransom would be paid to secure their return.'

He claimed that the men's families and Garda World's shareholders had not been told about the lack of kidnap insurance for the hostages.

He also told the court that despite the men being taken hostage in May 2007, Garda has continued to charge USAID, the American international development department, more than $1,000 a day for protecting fellow hostage Mr Moore.

Mr Wood said: 'Garda World has continued to profit from the captured hostages, as Garda World has continued to charge, at a high profit margin, for the services of the hostages.' Last night the father of one of the British hostages said the families had not been aware that Garda did not have kidnap and ransom insurance.

Colin, whose surname has been withheld and who has heard nothing from his son Alec since he was taken hostage, said: 'It is obviously concerning. If the facts are right, then it just adds to our misery.'

Sources close to the case said US government contracts normally stipulate that firms can continue billing for their people in kidnap situations.

The source also said not all security firms in Iraq had kidnap and ransom cover and instead employed their own experts to deal with hostage situations.

Last night Mr Wood refused comment, as did Garda World.