Dr Potter denies charges of indecent behaviour
The General Medical Council's professional conduct committee said Dr Brian Potter had acted improperly.
But it rejected other allegations against the former Scottish secretary of the British Medical Association and decided that no action will be taken against him.
The GMC said the evidence given by the patient, an Edinburgh laboratory chemist identified as Mr D but known to be Mahboob Ditta, was unreliable and not credible.
Ditta was found guilty at Edinburgh Sheriff Court in December 1999 of trying to extort money from Dr Potter.
The 48-year-old, from Edinburgh, admitted consensual contact with Ditta, now aged 41, but denied serious professional misconduct.
The GMC found that the doctor had been guilty of an improper sexual act on two separate occasions - once in the patient's home and once in his surgery.
Adrian Whitfield QC, defending, said his client had not acted in an indecent way.
"He is overwhelmed by the sense he has betrayed a profession to which he also contributed so very much.
'Web of lies'
"That happened at a time when his marriage was broken down.
"It should not have happened. However, it was fleeting and there was little evidence that any lasting harm was done. Dr Potter was a vulnerable person," he said.
Mr Whitfield earlier told the hearing in London that Ditta had spun a web of lies after attempting to blackmail the divorced father of three.
Ditta is now appealing against his conviction for a £30,000 blackmail attempt, which landed him a 30 month prison sentence.
Mr Whitfield said his client had been blackmailed.
"The judge described that as attempted murder of the soul. That has had a strong effect on the victim."
He said Ditta had told lies to the GMC, the jury in the court case, the police and Dr Potter.
He questioned why Dr Potter would go to the police about the blackmail if he wanted to buy his patient's silence.
"Why did Dr Potter go to the police with the probability that the publicity from the case would destroy his career and destroy his reputation?" he asked.
"How could it be right that Dr Potter wanted to buy him off quietly?"