(Recasts with ruling)
By Pracha Hariraksapitak
BANGKOK Oct 21 (Reuters) - Thailand's Supreme Court ruled on Tuesday that former prime minister Thaksin Shinawatra had violated a conflict-of-interest law while in office and sentenced him to two years in prison.
The nine judges ruled by five to four that Thaksin, who has been at the heart of Thailand's political crisis over the past three years and now lives in exile in Britain, had got involved in his wife's purchase of land from a central bank fund.
"The defendant is guilty of violating the anti-corruption law, and the punishment is two years in prison," a judge said, reading out the verdict.
Thaksin, speaking to Reuters by telephone, said the case was politically motivated. He has said before that he could not expect a fair trial from Thai courts. "I have been informed of the result. I had long anticipated that it would turn out this way," he said.
He denied British media reports he was seeking asylum in Britain. A Thai prosecutor said he would urge Britain to extradite Thaksin now that the court had sentenced him to prison.
The ruling is the first on a spate of corruption charges against Thaksin and his political associates prepared by graft investigators appointed after a military coup in 2006.
It will do little to lower the political temperature in Thailand, where Thaksin still commands wide support outside the capital, and will be seen as a further blow to the government of Prime Minister Somchai Wongsawat, who is his brother-in-law.
An elected government came to power this year but the main party in the coalition, the People Power Party, is seen by opponents as a mere proxy for Thaksin.
The extra-parliamentary People's Alliance for Democracy (PAD) has been waging a street campaign since May to force the government out and has occupied the prime minister's official compound since August.
Two people were killed and hundreds injured in clashes between PAD supporters and the police on Oct. 7.
The court area was plastered with signs warning Thaksin supporters and opponents they would be in contempt of court if they caused any disturbance.
About 300 government supporters were seen around the court, which was guarded by 100 uniformed police officers, a third of the number the police had earlier planned to deploy.
The PAD opted not to go ahead with a plan to march to the court. "We are staying where we are. We don't want to create any trouble," PAD spokesman Parnthep Pourpongpan told Reuters.
The political crisis dates back to 2005 when the PAD launched street protests against Thaksin, alleging corruption and abuse of power. It has meandered through a coup to elections and back to protests and shows no sign of resolution.
The army removed Thaksin from power because of allegations of rampant corruption during his five years in power. Nearly $2 billion of his family's assets have been frozen in Thai bank accounts. (Additional reporting by Nopporn Wong-Anan; writing by Alan Raybould; editing by Roger Crabb)