BANGKOK, Thailand -- Thailand's shaky government has suffered a devastating decision by the attorney-general's office, which ruled that the prime minister's party, and the biggest opposition party, "both violated the law" and should be dissolved.

Prime Minister Thaksin Shinawatra -- clinging to power despite the past few months of anti-Thaksin street protests, an election boycott, and widespread condemnation by the country's media -- responded by insisting his party was innocent.

Thaksin hopes to contest a national election on October 15, despite loud complaints that he did not pay profit taxes on his family's multi-billion dollar telecommunications deal with Singapore.

The attorney-general's office, however, declared Thaksin's nationalistic Thai Rak Thai (Thais Love Thais) party -- plus the main opposition Democrat Party and three tiny parties -- acted illegally during a flawed April election, which was later invalidated.

"The committee has voted unanimously to forward, to the attorney-general, a recommendation to ask the Constitution Court to dissolve the five political parties altogether," Attorney-General Office spokesman Atthapol Yaisawang announced on Tuesday (June 27).

"Their alleged wrongdoing might have been on different occasions, but they violated the law," Attaphol said after the decision by an 11-member, fact-finding panel headed by Deputy Attorney-General Chaikasem Nitisiri.

"The party has confidence in its innocence," Prime Minister Thaksin responded, shaken by the latest threat to his populist, pro-American party which he built from scratch into a crushing political machine.

"As a legal entity, this party has never made a decision that is immoral," Thaksin said.

Democrat Party leader Abhisit Vejjajiva also claimed innocence.

"We know what we are fighting against, and we know it isn't easy," Abhisit responded after the prosecutors' announcement.

"We will fight and maintain righteousness," Abhisit said.

If Attorney-General Pachara Yutithamdamrong endorses his committee's unanimous decision, the case would go to the Constitution Court to rule if the parties should be dissolved for violating Article 66 of the Political Party Act.

Article 66 forbids parties from "subverting the democratic system," "acquiring executive power by unconstitutional means," or threatening "national security, public order, or ethics and morality."

If convicted, the parties' leaders and other top members could be blocked from holding party executive posts for five years.

They could still be candidates for Parliament, however, and run the government as politicians by switching to other parties, creating new parties, or as independents -- which could mean Thaksin will remain prime minister.

The problem dates back to before the ill-fated April 2 nationwide poll, which Thaksin's party won.

Predicting they would lose, the opposition Democrat Party spent much of March snarling Bangkok's streets with peaceful, mass demonstrations demanding people "vote no" instead of endorsing candidates.

They claimed Thaksin staged the election to dodge complaints that he did not pay taxes on the 1.8 billion U.S. dollars profit his family pocketed when they sold their Shin Corp. telecommunications empire in February to the Singapore government's investment wing, Temasek Holdings.

Under Thai law, Thaksin's candidates would not be able to sit in Parliament if the "no vote" boycott was successful, because unopposed candidates must nab at least 20 percent of a constituency's votes.

If an unchallenged candidate fails to gain 20 percent, that Parliament seat remains vacant, and fresh polling must be held.

The boycott was meant to deprive Parliament of its required 500 members, and end Thaksin's reign.

Opposition parties told Thais to "vote no" instead of avoiding the polls, because voting is required.

But the "vote no" boycott, and the Democrats' spurned demand for the king to appoint an unelected prime minister, violated the election, according to the attorney-general's office.

Meanwhile, to circumvent the boycott, Thaksin's party allegedly paid several small parties to run in the election -- even though the obscure parties would lose.

The illegal ploy was to give the appearance of a contested vote, and allow Thaksin's otherwise unopposed candidates to claim legitimacy, the attorney-general's office said.

"If Thai Rak Thai is to be accused of hiring small parties to contest the April 2 elections, you need uncontestable evidence and proof beyond a shred of doubt that the party leader [Thaksin] was involved or, in writing, asked someone to hire the parties for him, and we understand there is none," said a Thai Rak Thai leader, Kuthep Saikrachang.

Thaksin came to power in 2001, and was re-elected in February 2005 with 19 million votes.

Before the April 2 election, Thaksin's party held 375 of Parliament's 500 seats.