Ecuador's high court on Thursday ruled against the El Universo newspaper in a libel suit filed by President Rafael Correa that was seen as a crucial test of press freedoms in the South American country.
The National Court of Justice (CNJ) sentenced the three top executives of the media company to three years in prison and fined them $40 million, denying an appeal as "out of order."
Correa sued the El Universo daily in March 2011 alleging "defamatory libel" over a column by former opinion page editor Emilio Palacio that accused the president of crimes against humanity.
Palacio suggested that a future president could take Correa before a criminal court for ordering the military to fire at its discretion on a hospital on September 30, 2010, during a police uprising.
A lower court judge ruled against the newspaper in July, handing down the $40 million judgment and prison sentences against the newspaper's publisher, Carlos Perez, deputy directors Cesar Perez and Nicolas Perez, and Palacio, who fled to Miami. An appeals court upheld the sentence in September.
The latest ruling will not take effect for three days, allowing the parties to request clarifications, according to defense attorneys.
The case has been widely criticized by rights groups as a blow to freedom of speech in Ecuador and also calls into question the independence of the Ecuadoran courts.
Xavier Zavala, a lawyer for El Universo, on Wednesday said the case had turned Ecuador into an object of "ridicule."
But Correa hailed the ruling at a press conference early Thursday, saying it would "change history."
"Freedom belongs to everyone, not just those who can afford to buy a printing press," he said. "This has been a struggle for true freedom of expression."
He added that he would have preferred to have avoided going to court, and that he wished the newspaper had had "the decency to correct the mistake."
The defense has vowed to take the case to the Interamerican Human Rights Commission and then to the Interamerican Human Rights Court, and a lawyer for the newspaper called the $40 million fine "irrational and immoral."
The newspaper's management had said the fine would likely bankrupt it, given that the daily's total capital is just $35 million.
Correa has said the compensation awarded by the court will go to an official global warming initiative.
Speaking in Miami on Wednesday, Cesar and Nicolas Perez said they feared for their safety in Ecuador.
"Of course we're afraid ... it's been five years of violent statements from the president against the media in general, with a special fixation against El Universo," Cesar Perez said at a press conference.
Palacio has sought political asylum in Miami and is considered a fugitive from Ecuador.
The column in question referred to a foiled attempt to oust Correa, an elected leftist and economist by training, in September 2010.
Hundreds of police had risen up in revolt over a law that reduced their bonus pay. Correa was cornered in a police hospital for 12 hours after his attempt to personally confront rebellious officers in the capital backfired.
Correa was rescued by loyal soldiers and police. The president claims that the uprising -- which left 10 dead and 274 wounded -- was instigated by former president Lucio Gutierrez.
The president has taken other legal action against what he calls the "corrupt" media, leading critics to accuse him of attacking free speech.
Earlier this month a provincial court ordered two journalists to pay Correa $2 million in damages over a book that describes contracts the state awarded to the president's brother, Fabricio Correa, worth a total of $167 million.
Correa denies he knew of the deals ahead of time and said he moved to stop the contracts once he learned of them.