A MAN with a 25-year link to a paedophile network has been living in a North-East town, it emerged last night.

Sixty-year-old Thomas O'Carroll, a founding member and former head of the now defunct Paedophile Information Exchange (PIE), was arrested in Shildon, County Durham, earlier this week.

His arrest at his home in the town's Market Place - less than 500 metres from a school - followed a three-year nationwide investigation into a suspected paedophile ring.

The revelations came as a shock to residents, who were led to believe he was a journalist.

O'Carroll, along with two other men from Surrey and Leicestershire, was arrested on suspicion of conspiracy to distribute indecent images of children, distributing indecent images of children and taking indecent images.

Detective Inspector Neil Thompson, who led the operation, said the arrests would be "very important in helping to disrupt a significant paedophile network".

A Metropolitan Police spokeswoman said all three men had been released on police bail and were due to return for further questioning on March 7.

Concerned neighbours of O'Carroll said last night they were now scared to let their children play outside.

Early yesterday morning, O'Carroll was seen to move belongings from his house into a car and has not been seen by residents since.

Vince Clarkson, a local resident, said: "I've got a ten-year-old girl and you're scared to let them out of the house.

"You just want to know where he's come from and why he's come here."

O'Carroll is understood to have moved to Shildon from Leamington Spa, Warwickshire, in August 2004.

He told neighbours he was a journalist who had been living in the Middle East.

In 2002, O'Carroll was arrested after nine crates, which he was sending back from Qatar, were searched at Heathrow airport

Fifty-four photographs featuring naked or scantily-clad children were found. O'Carroll claimed they were "artistic street photography".

He was sentenced to nine months in jail, ordered to pay £1,000 prosecution costs, and placed on the Sex Offenders' register.

But following a hearing at the Court of Appeal, the prison sentence was overturned and O'Carroll was removed from the register.

The appeal judge said the original sentence was manifestly excessive, adding that the trial judge had been influenced by O'Carroll's past membership of PIE.

In 1981, O'Carroll was sentenced to two years' imprisonment for conspiracy to corrupt public morals after he published PIE's worldwide contact list in a bid encourage sexual contact with children.

PIE, founded in 1974, argued there should be no age of consent and campaigned for the acceptance of paedophilia.

It was closed 20 years ago, but it is believed O'Carroll had resurrected the group in the form of the International Paeodophile Child Emancipation Group, which campaigns to legalise child sex.

An elderly neighbour of O'Carroll's said last night: "He really kept to himself and you didn't see him much.

"It does worry you, we've got a niece's daughter who comes here."

Another neighbour said the news had left residents deeply worried.

She said: "I was physically sick and we've not slept since we found out who he was and we're not going to sleep.

"I've a got a little girl, and as parents you're there to protect, and we feel so vulnerable in our position.

"It's an awful situation that we've been put in, and our children are prisoners in their home now."

"The police have at least been very helpful and they have tried to allay our fears as much as they can, but their hands are tied."