Had Thaksin been found guilty, he would have been not only forced to resign but also barred from public office for five years. Now, Thaksin will be allowed to continue to head the government, which came to power in January after his Thai Rak Thai, or Thai Love Thai, Party won a sweeping victory in general elections.
Chief Judge Prasert Nasakul said the 15-member panel voted 8-7 in Thaksin's favor.
"I would like to thank the judges who voted for me, for giving me justice and announcing to the world that Thailand remains normal, that honest people will not be forced out of politics," Thaksin told reporters after the verdict.
The Constitutional Court rejected a finding in December by the National Counter Corruption Commission that Thaksin had intentionally failed to list as assets millions in company shares owned by him and his wife, but held in the names of several proxies, including some of their domestic servants.
Thaksin had denied wrongdoing, saying it was an "honest mistake."
He had said his failure to list all his assets when he was deputy prime minister in 1997 was inadvertent and a result of confusion about the law.
Thaksin had been waiting for the verdict with his wife at the Government House. He had joked earlier that he was unsure whether or not to hire a 10-wheel truck to remove his belongings out Friday.
"I hope the dark cloud has been removed," he said in a public address soon after the court delivered its verdict. "I want to assure the Thai people that government will work hard from now on and there will be no more political uncertainty in this country. The nightmare of my life has become a force to move us all."
There had been concerns of possible street protests after the verdict, particularly if the court had found Thaksin guilty, and dozens of riot police were standing by outside the court. Hundreds of his supporters who were waiting there for the verdict cheered when it was announced and there were no signs of trouble.
"I am glad to hear the verdict. As a Thai I am very happy," said Linchoo Saejang, 52, before she uncorked a bottle of champagne.
Thaksin, 52, made his fortune in the telecommunications sector and is one of Thailand's richest people with a fortune of $1.2 billion according to Forbes Magazine. He established the Thai Rak Thai Party in 1998 to serve as his springboard to the premiership.
The Secretary-General of the National Counter Corruption Commission, Klanarong Chanthik, said at Thaksin's trial that while the commission was not accusing him of corruption in obtaining his wealth, he showed clear intent to hide some assets, resulting in an absence of transparency required of politicians by the Constitution.
The court faced strong pressures on both sides of the case.
An impartial ruling applyinthe letter of the law was considered crucial for maintaining the momentum toward reforms, established by a new constitution to fight endemic graft in politics.
On the other hand, Thaksin's supporters argued that his violation was technical and inadvertent, and the court should also consider the popular mandate Thaksin in the January election, which he won although he had the commission's indictment hanging over him.
Several mass petition and letter-writing campaigns were launched to pressure the court on his behalf. At the same time, his lawyers tried to discredit the indictment against him as flawed and politically biased, although they did not challenge the facts of the case.
Critics said the lobbying efforts were a step backward for Thai democracy, since they suggested that important people can remain above the law. They are also dismayed by efforts to discredit the National Counter Corruption Commission as Thailand has finally embarked on serious political reform.
Since taking office in February, Thaksin has moved to rapidly fulfill his promised policies, although the economy so far has failed to show any quick sign of improvement, amid a global economic slowdown.
Thailand's stock market surged after the decision. The benchmark Stock Exchange of Thailand (SET) composite index ended 4.2 percent higher at 315.95 points.
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