A dozen minicabs have been forced from the roads as part of Scotland's biggest police surveillance exercise into drug dealing and money laundering.

Glasgow's licensing court yesterday agreed with Strathclyde Police that the directors of the city's United Cars, previously known as Domino Cars, were no longer "fit and proper persons" to operate the business after they were caught with almost £400,000.

George Mullen and Peter Smith were arrested and charged as part of the Operation Folklore, which led to their mutual acquaintance Jamie "The Iceman" Stevenson receiving a 12 year sentence for money laundering.

Smith was jailed in May for three years for his role and, although Mullen was acquitted, Glasgow's licensing committee took the view that his association with his business partner and their belief he would continue to financially benefit from the cab firm led to the decision to suspended the licences.

Last year the same court axed the licences of 10 Skoda minicabs registered under the name of Stevenson's wife Caroline after accepting the police's argument that the vehicles had been bought with criminal proceeds and were being used to launder cash.

The latest suspensions last up to two years but the "fit and proper" tag would make it difficult for anyone associated with the ownership of United to secure further cab licences.

The police will also take the same objections to South Lanarkshire Council, where 41 of the firms' minicabs are licensed, in the coming weeks.

But they are only able to argue that councils should suspend the licences of the private hire cars belonging to United as the legislation regulating minicab bases, which would allow the police to seek their closure, has not yet come into force.

At yesterday's hearing the committee heard that on May 18, 2006, the police witnessed 40-year-old Smith and Mullen, 52, leaving Mullen's house with a suitcase, which was found to contain £389,035 when police stopped the 4X4 a short time later. A further £10,010 in used banknotes was also found at Mullen's feet. The minicab boss later admitted the money had been in his house for two days.

His lawyer, Jim Friel, argued that his client had been "totally exonerated" by the courts and later cleared again in a probe by Proceeds of Crime teams. He said that Smith had taken the decision in early August while in prison to "simply walk away from the business". Mr Friel also added there was no evidence that Smith would still financially gain from the business.

But Chief Inspector Stuart Neill said: "Mr Friel mentions that Peter Smith is not involved in the company. You can take a name off a licence yet still gain financial benefit. When Mr Mullen gave evidence he said he, Peter Smith and Scott Thomson were equal partners and that each had a share of £600,000. To say he's just thrown that away I find very hard to believe."