If driving in Italy was not already exasperating enough, what was hailed as the introduction of the world's first smart traffic lights has, in fact, made life even more miserable for more than million of the nation's drivers.

Pioneering technology that could automatically detect motorists who jumped red lights and committed other violations, including speeding and illegal turns, was rigged, it is claimed, to trap the innocent and in the process rake in fines of €150 (£130) a time.

Stefano Arrighetti, 45, an engineering graduate from Genoa, who created the "T-Redspeed" system is under house arrest, and 108 other people are under investigation after it was alleged that his intelligent lights were programmed to turn from amber to red in half the regulation time. The technology, which was adopted all over Italy, employs three cameras designed to assess the three-dimensional placement of vehicles passing a red light and store their number plates on a connected computer system.

Download the new Independent Premium app Sharing the full story, not just the headlines

It is said more than one million Italian drivers were unjustly snared on red and landed with flat fines after the lights did not stay on amber for the regulation five or six seconds.

An idea of the extent of the scam can be gauged from the list of those the police have put under investigation. They include 63 municipal police commanders and 39 local government officials as well as the managers of seven private companies.

Prosecutors in Verona maintain that Mr Arrighetti committed fraud when he supplied his devices to public administrations around Italy because he declared that they had been ratified by the Ministry of Transport. In fact, while the cameras had been ratified, the computer hardware that registered offences had not been. Mr Arrighetti was not answering his phone yesterday, and in fact has never given an interview but his lawyer, Rosario Minniti, maintained that he was blameless in the affair. "Arrighetti is a genius whom the whole world envies," he boasted. "And he does not deserve these accusations ... They are accusing him of fraud in the supply of goods to public entities but he never had any connection to the local administrations." He insisted there was no need for the system's hardware to be ratified.

During the two years it was in use, the T-Redspeed system became loathed by motorists and adored by local governments, which raked in hugely increased revenues from the fines. A report from the police in Milan claims that 300 municipalities and a handful of private companies took a share of the bounty.

The fraud was uncovered by Roberto Franzini, police chief of Lerici, on the Ligurian coast, who – in February 2007 – noticed the abnormal number of fines being issued for jumping red lights. "There were 1,439 for the previous two months," he said. "It seemed too much: at the most our patrols catch 15 per day." He went to check the lights and found that they were changing to red after three seconds instead of the five seconds that had been normal.

Now towns and cities across Italy face the nightmare of processing hundreds of thousands of claims for reimbursement from drivers who say they were victims of the scam. Commander Franzini said: "Safety controls cannot be transformed into a form of taxation."