A Thai court found Potjaman Shinawatra, the wife of ousted Prime Minister Thaksin and a major force in his political and business empire, guilty of tax fraud on Thursday and sentenced her to three years in jail.

"The Mistress", as she is frequently referred to in Bangkok political circles, stood emotionless as the verdict was delivered. Thaksin appeared to be fighting back tears as Potjaman walked over to pat him on the back seconds after the ruling.

"The second defendant was not only supposed to behave herself as a good citizen, she was also meant to be a good role model as the wife of the prime minister," the judge said, reading out the verdict in a televised ruling.

Potjaman, her brother Bannapot Damapong and her secretary were charged with colluding to evade tax worth 546 million baht (8 million pounds) in the transfer of shares in a telecoms firm Thaksin founded.

The trio were freed on bail of 5 million baht each immediately after the verdict, and a family spokesman said they would appeal.

Around 1,000 pro-Thaksin supporters massed outside the courtroom carrying roses and banners, although they were prevented from getting too close to the entrance by 300 riot police. There was no trouble.

Although widely expected, the verdict is a blow to Thaksin in his fight to clear his name and return to mainstream political life after his removal from office in 2006 by the military on the pretext of "rampant corruption".

Army-appointed graft investigators have filed several cases, and the guilty verdict is a sign of the legal tide turning against the telecoms billionaire, whose unofficial influence over the current government, packed with his close aides and associates, is not disputed.

On Wednesday, the Supreme Court said it would hear a case against Thaksin over allegations he arranged soft loans to military-ruled Myanmar while in office to benefit his family's telecoms business.

Two days earlier, the same court agreed to investigate Thaksin's entire cabinet, including three ministers in the current administration, for allegedly breaking gambling laws in a push to launch a state lottery in 2003.

The various legal cases have added to the worries about political stability that have caused the stock market to fall 22 percent since the end of May, when Thaksin's enemies kicked off a street campaign to oust the current, elected government.

Most of the concerns centre on the government's preoccupation with fighting off political attacks rather than concentrating on the economy, which is suffering from decade-high inflation and stuttering growth.

Thursday's ruling had no impact on the baht or stocks.