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Ms Jayalalithaa flew from Chennai to Bangalore this morning to attend the hearing, which took place in a makeshift court created at the Bangalore Central Jail on the outskirts of the city.
The case against her is 18 years old and was filed originally by Subramanian Swamy, now a BJP leader. "I feel vindicated...she cannot recover from this loss of credibility," he said to NDTV.
The case was pursued by Jayalalithaa's arch rival, the DMK, after it came to power in Tamil Nadu. She has been convicted along with three close aides, including Sasikala Natarajan, who lives with her.
Tamil Nadu is tense amid concerns about clashes between workers of the DMK and Ms Jayalalithaa's party. Stones were thrown at the Chennai residence of DMK chief M Karunanidhi after the verdict was delivered.
The case against Ms Jayalalithaa accuses her of misusing her first term as Chief Minister of Tamil Nadu from 1991 to 1996 to collect assets that were vastly disproportionate to her income.
The prosecution has argued that Ms Jayalalithaa took a salary of just one rupee when she was elected Chief Minister, but used her five-year tenure to illicitly gather huge assets that added up to Rs. 66 crores.
The alleged illegal wealth includes 2,000 acres of land, 30 kg of gold and 12,000 saris.
Ms Jayalalithaa has denounced the case as political vendetta. She argued that the prosecution undervalued her earlier assets, ignored her income from other sources and exaggerated the value of her property.
In the national election this year, her AIADMK virtually swept the state, winning 37 of 39 Lok Sabha seats. The state votes for its next government in two years.
The case against her was shifted to a Bangalore court in 2001 when Ms Jayalalithaa returned to power for the second time. A DMK leader argued that a trial in Tamil Nadu could not be unbiased while her party, the AIADMK, was governing the state.