The military court, whose decision must now be ratified by President Mahinda Rajapakse, found that Fonseka favoured an arms company run by his son-in-law, the official said, asking not to be named.[break]
Last month, Fonseka was stripped of his rank and pension after another court found him guilty of dabbling in politics while in uniform.
Fonseka, 59, who led the military to victory over Tamil Tiger rebels in May last year, fell out with the government and unsuccessfully tried to unseat Rajapakse in January polls.
"The chairman of the court read out its decision and it must now be ratified by the president," the official said, adding that the closed-door court would make no formal announcement.
Rajapakse is expected to ratify the decision -- seen as a formality -- when he returns from the United Nations general assembly session this month.
Fonseka´s lawyers had refused to make final submissions in the former army chief´s defence after accusing the court of serious irregularities.
Fonseka was arrested two weeks after his defeat in the presidential elections and has remained in military custody since. He won a seat in parliamentary elections in April, however, allowing him to attend parliament.
He has said the government is seeking revenge for his decision to stand against the president and to keep him from from speaking in parliament.
"They are going to put me in jail and I am prepared for that," Fonseka told reporters in parliament after being escorted by the military from his room in Colombo´s naval headquarters to parliament in August.
The first court martial ordered the withdrawal of the medals he had earned during his 40-year military career and also stripped him of his rank and pension.
The former four-star general quit the military in November to become an opposition politician, but has since been embroiled in numerous court cases, which he says are being orchestrated by the government.
He faces civilian charges of employing army deserters, as well as revealing state secrets -- offences that carry a 20-year jail term.
The 37-year ethnic conflict in Sri Lanka ended in May last year when government forces wiped out the Tamil Tiger separatist group which had fought since 1972 for a Tamil homeland.
The victory boosted the popularity of Rajapakse among the ethnic Sinhalese majority, but the military campaign has since been dogged by war crime allegations which have strained Colombo´s relations with former Western allies.
Fonseka angered the government by saying he would willingly to testify before any international war crimes tribunal. Rajapakse has vowed to prevent any such probe.
The United Nations estimates that at least 7,000 ethnic Tamil civilians were killed in the final months of fighting between government troops and the Tamil Tigers.
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