London's Metropolitan Police force has been found guilty of endangering the public over the fatal shooting of a man officers mistook for a suicide bomber.
The force broke health and safety laws when officers pursued Brazilian Jean Charles de Menezes to a Tube station and shot him seven times, a jury found.
It was fined £175,000 with £385,000 costs over the 22 July 2005 shooting.
The Old Bailey jury said police chief Cressida Dick, who led the operation, bore "no personal culpability".
Ms Dick, now deputy assistant commissioner of the force, had been accused by prosecutors of failing to keep control of her officers.
Met Police Commissioner Sir Ian Blair said outside court that he was staying in his job - despite calls for his resignation.
Mr de Menezes's relatives said they wanted to see a "full and thorough" inquest into the electrician's death.
Harriet Wistrich, the family's solicitor, said the police had been an "unstoppable force" when they pursued him, and the defence had "descended to the gutter" to blacken his name.
During the trial, the jury heard that Scotland Yard commanders had made a string of errors on 22 July that culminated in an unwarranted risk to the public and ultimately the death of Mr de Menezes.
The operation began when detectives investigating the failed suicide bombings of the day before - 21 July - linked one of the suspects, Hussain Osman, to a block of flats in south London.
Mr de Menezes also lived in the block, and when he left home at 0930 BST, surveillance officers were unsure if he was their target.
Clare Montgomery QC, prosecuting, said the situation had worsened because senior officers failed to keep to their own agreed plan, while firearms teams were both poorly briefed and in the wrong locations.
This meant that it became impossible to effectively stop the suspected suicide bomber before he boarded a bus and headed for the Underground.
The Met denied this, saying its commanders and officers on the ground did all they could to apprehend the bombers and minimise the risks to the public.
Anna Dunwoodie, who was in the same carriage as Mr Menezes when he was shot, told the BBC how she witnessed this "horrific" moment when armed police ran on board the train.
"It didn't feel to me like I was in the middle of a police operation," she recalled.
"The men who came running in seemed quite chaotic. I'd describe them as slightly hysterical.
"Jean Charles, to my knowledge, did nothing out of the ordinary.
"I didn't notice him until he had a gun pressed to him. It felt to me like he was someone who was being picked on at random because he was nearest to the door.
"We all ran to the sound of gunshots."
After the verdict was delivered, Mr Justice Henriques said: "This was very much an isolated breach brought about by quite extraordinary circumstances.
"One person died and many others were placed in potential danger."
Mr Menezes was caught on CCTV as he was followed by two officers
In deciding on a penalty, the judge said he was aware that a heavy fine would result in a loss to the public purse and a reduction in essential policing.
The Independent Police Complaints Commission (IPCC) said it hoped to publish its full report into the case within days, but "disciplinary issues" were still to be decided.
Chairman Nick Hardwick said the body appreciated the courage of some of the officers involved, but added: "However, the Met's mission is to make London safer. On this one occasion, they failed."
Len Duvall, chair of the Metropolitan Police Authority, said the MPA fully supported Sir Ian and would continue to work with him.
"We ask the police to do a difficult job on our behalf and sometimes they make mistakes."
The Liberal Democrats and Conservatives have called for the commissioner to resign.
But Home Secretary Jacqui Smith dismissed the calls, insisting Sir Ian had her "full confidence" and support.
BBC home affairs correspondent Daniel Sandford said Sir Ian still has to face questioning from the MPA, a report into the shooting and an inquest into Mr de Menezes's death.
"The question is can he survive this drip, drip, drip effect - or whether some people are going to say to him, rather than going through all that, it's better that you go."
Mayor of London Ken Livingstone said the guilty verdict made it more difficult for police to protect the capital against terrorism.
Brian Paddick, one of Sir Ian's former senior officers, told BBC1's Question Time the commissioner was wrong to say he would not resign without first taking some time for reflection.