Lecturer-turned-businessman Stuart Spacey has appeared at Crown Court accused of siphoning off pound;1 million from a training firm linked to Barnsley college.
Spacey, 68, was accused of conspiracy to defraud Progress Training when he appeared at Sheffield Crown Court on Wednesday.
The court heard the latest allegations to emerge from further education's involvement with franchising which followed colleges' liberation from local authority control in 1993.
Spacey has been under investigation by the Serious Fraud Office and South Yorkshire Police since August 2001.
He was a lecturer at Barnsley college until 1992, when he became the company secretary of Barnsley College Holdings, a registered charity, and its subsidiary Progress Training, which went into liquidation in 2001.
In 1995, he became a consultant to Progress Training. The companies were intended to act as revenue-raisers for the college by providing courses under a franchise agreement.
Medical reports are awaited on a second person suspected of conspiracy to defraud before the Crown Prosecution Service decides whether they should face charges.
A Serious Fraud Office statement before the hearing said: "The defendant is accused of conspiring with another to defraud Progress Training. The offence charged relates to substantial sums (estimated to be around pound;1m) that it is believed Spacey and another person appropriated during the course of 1995 to 2002.
"It is alleged that this was achieved through the use of fictitious companies and false invoices and payments.
"By this means it is alleged they dishonestly obtained payment for work and services knowing that no such work had been done or services provided.
"A decision on the inclusion of the other person in the proceedings awaits the provision and assessment of medical reports."
The college's troubled finances and its relationship with Progress Training had been looked at by auditors from the Further Education Funding Council in 2001, before the quango was replaced by the Learning and Skills Council.
The National Audit Office had also been scrutinising the college.
Former principal David Eade left the college in March 2001 on grounds of "incapacity to undertake the duties of the post" and continued to suffer ill-health after his departure.
He also resigned as a member of the Further Education Funding Council on grounds of ill-health.
Police and the Serious Fraud Office refuse to say whether Mr Eade is a potential witness in the case.
Joe West, the current principal, was appointed from St Helen's College, near Liverpool, the same year, replacing Christine Braddock, who was appointed to the post but left before she signed her contract.
Spacey was initially charged at Barnsley police station on April 14, when he was granted unconditional bail.
The case continues. Spacey will enter a plea at a future hearing.