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A professional Merseyside gambler who swindled his victims out of over £2m was today found guilty of five counts of fraud.

John Bailey, 45, known as ‘Pencil Man’, and from Waterloo, used his “powers of persuasion” to encourage people to ‘invest’ in his alleged businesses then used the money to fund his gambling habit.

Crime Reporter John Siddle looks at the man who struck fear into the hearts of bookmakers.

It was a seven-word warning that struck fear into the heart of bookies across the country: “The Pencil Man is in your area.”

The electronic alert referred to John Bailey, whose betting slip sleight-of-hand tricked bookmakers out of vast fortunes.

Self-described “compulsive gambler” Bailey, 45, began betting aged 12 and by the age of 19 had accrued his first conviction for obtaining property by deception.

But it was at the turn of the century when he became the scourge of bookies nationwide.

The Waterloo man’s scam was simple, but well-rehearsed and very-effective.

Bailey, who was described by his victims as “confident”, “polite” and “self-effacing”, retrieved betting slips written in pencil which had already been time-stamped, and scribbled winning bets on them before slipping them back over the counter.

Experts reckon the fraudster could have netted up to £40,000 a week – and more than £1m in total over a six year period – as he travelled the country preying on high street, and latterly, independent bookies.

He was so feared that he was banned by injunction from one chain – and the betting industry made wholesale changes to make Bailey’s modus operandi impossible.

Warwick Bartlett was the chairman of the Association of British Bookmakers (ABB), which represents Britain’s 8,300 betting shops, when Bailey was pulling off his con.

He told the ECHO: “It was sleight of hand, using a pencil which he could use to quickly change things.

“He was quick in getting his bet back from the other side of the counter.

“He had an engaging personality, he was larger than life. Betting shop staff were all trying to please their customers, in what was a competitive environment, and he took full advantage of that.”

Bailey was jailed for three-and-a-half years in 2003 after being convicted of fraud.

After his conviction, Bailey was granted conditional bail but disappeared. It prompted another emergency alert to the nation’s bookies: “The Pencil Man is on the run” before he was detained weeks later in Liverpool.

In his recent trial, Bailey told jurors why he was handed the nickname.

He said: “I was a compulsive gambler. I devised a way to defraud betting shops and basically, because of me, betting shops don’t operate [the same kind of] betting slips anymore.

“I’m called the Pencil Man because I committed fraud with pencils.”

The conviction enabled three of the country’s biggest bookies – William Hill, Ladbrokes and Totesport – to secure an Asbo barring Bailey from all of their shops in England and Wales.

A court heard that following his release from prison, he allegedly waged a campaign of harassment, including damaging shops, gluing locks, and acting in an intimidating nature towards staff.

Banned from the bookies, Bailey turned his hand to online betting exchange Betfair – where punters can bet against themselves – using numerous other people’s accounts after his own was blocked.

Bailey said: “I just opened accounts in other people’s names with the knowledge of other people – many, many accounts, even accounts that haven’t been mentioned in this case.”

A jury today dismissed his defence that his victims knew how their money was being used and convicted him of five counts of fraud between 2009 and 2013. He was cleared of a further three charges.

Andrew West, who prosecuted the case, told the jury Bailey first took money off people by lying, on his own or with an accomplice, before telling them it was for gambling.

He said Bailey then he told them to give him more money or they wouldn’t be able to get the original investment back.

Large amounts of this money went through other people’s accounts and only a few thousand pounds of it was ever returned.

His victims now face an anxious wait to see if any of their losses can be recouped through the Proceeds of Crime Act.

Mr West said: “John Bailey used his powers of persuasion to encourage people to ‘invest’ in him and his alleged businesses. However, instead he used these sums of money to fund his prolific, and disastrous, gambling habit.

“This was entirely dishonest. Not only did he lie to investors in order to gamble with their money, he also then demanded further betting money from them, in order to regain their original savings that he had lost. This cycle of debt continued with some victims losing hundreds of thousands of pounds. One victim lost just over £2m.

“Far from appreciating the damage he had wrought, John Bailey continued to gamble and deceive investors, breaching a previous ban of holding a specific betting account. Known as the ‘Pencil Man’ because he always carried a pencil when visiting betting shops, he has now been held to account for the substantial losses and distress he caused his victims.”

Bailey is to be sentenced on June 11.