In 2007, the Constitutional Court made a landmark ruling dissolving Thaksin's original Thai Rak Thai party for fraud in a 2006 election, and banned its executives from politics for five years. Thaksin went into self-imposed exile in 2008 to escape a two-year jail sentence for conflict of interest while prime minister.
Thaksin's allies in late 2007 handily won the first post-coup election, but the Constitutional Court in 2008 kicked out two successive pro-Thaksin prime ministers.
A coalition government then cobbled together by the opposition Democrat Party had to use the army to put down pro-Thaksin demonstrations in 2010 that left more than 90 people dead in street battles, but Yingluck and her Pheu Thai party won a sweeping majority in a mid-2011 general election.
Opposition senators lodged the case with the Constitutional Court over the transfer of National Security Council chief Thawil Pliensri. He was replaced by the police chief, who in turn was replaced by a Thaksin relative.
"Transferring government officials must be done in accordance with moral principle," the court said in its ruling, read aloud on live television for almost 90 minutes. "Transferring with a hidden agenda is not acceptable."
Yingluck's fortunes plunged when her party's lawmakers late last year used shady legislative tactics to try to ram through a law that would have given an amnesty to political offenders of the previous eight years, including Thaksin. The move ignited mass anti-government demonstrations.
Seeking to ease the pressure, Yingluck in December dissolved the lower house and called elections for Feb. 2. But her opponents on the street disrupted the polls, which in turn were invalidated by the courts.
Analysts called Wednesday's decision a damaging one for Thailand's judicial system.
"The credibility of the justice system has vaporized," said Thongchai Winichakul, a professor of Southeast Asian history at the University of Wisconsin. "The royalist conservatives may celebrate this judicial coup. But the world will mourn over the death of another democracy."
Associated Press writers Grant Peck and Jocelyn Gecker contributed to this report.
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