* Prosecutors claimed man was human-smuggling mastermind
* Court convicts him of lesser crime, says he can go free
* Lawyers says man will apply for asylum in Italy
* Police take him from prison to expulsion centre (Adds police take Eritrean to expulsion centre)
By Wladimiro Pantaleone
PALERMO, Italy, July 12 (Reuters) - An Italian court ruled on Friday that an Eritrean man extradited from Sudan in 2016 was the victim of mistaken identity and dismissed allegations that he was a ruthless, human-trafficking kingpin.
However, the judges said Medhanie Tesfamariam Berhe was nonetheless guilty of abetting people smuggling and handed him a five-year prison term and a fine of 100,000 euros ($112,450).
Because he has already spent three years behind bars, the court said he could go free. But rather than release him, police took Berhe to a facility in the centre of Sicily where migrants are placed ahead of their eventual expulsion.
His lawyer Michele Calantropo said Berhe had a right under Italian law to appeal his conviction, adding that he thought it would be illegal to expel him at this point in time.
"He cried like a child when he was told that the judges had recognised it was mistaken identity and ordered his immediate release," Calantropo had said earlier outside the courtroom, expecting his client to be immediately be let out of prison.
"Today we have applied for asylum for him," he said.
Friday's verdict represented a setback to both Italian and British investigators who worked together to secure the arrest of the man who was identified in court as Medhanie Yehdego Mered - a notorious Eritrean smuggler nicknamed "the General".
The defendant, arrested by police in a coffee shop in Sudan's capital Khartoum, maintained that he was called Berhe and was an impoverished refugee with no criminal background.
"The court has accepted our position. He is not the General," Calantropo said.
Some of Mered's alleged victims had testified that they did not recognise the arrested man, while relatives of the alleged smuggling mastermind said it was a case of mistaken identity. DNA tests also suggested it was the wrong person.
However, Italian prosecutors Calogero Ferrara and Claudio Camilleri insisted during proceedings, which were spaced out over three years, that the right man had been caught, thanks partly to the help of Britain's National Crime Agency.
They had demanded a 14-year prison sentence.
"The court has recognised that this man was a human trafficker," chief prosecutor Francesco Lo Voi told reporters, adding that his office would read the court's full report on the case before deciding whether to appeal the reduced verdict.
The court found five other men - three Eritreans and nationals from Ivory Coast and Ghana - guilty of various human smuggling offences, handing them terms of up to five years, three months in prison plus fines of up to 60,000 euros.
At the time of Berhe's arrest some 360,000 migrants had crossed the Mediterranean Sea to Italy in just two years, with many hundreds drowning while trying to reach Europe.
The number of migrant crossings has since risen above 600,000, but the flows have slowed dramatically over the past two years as successive governments in Rome have cracked down on people smuggling.
Italy and Britain worked together for more than an year trying to track the General, using telephone intercepts to follow his movements before deciding to request his arrest by Sudanese authorities in June 2016.
During his trial, Berhe acknowledged phoning contacts in Libya, but said he was merely looking to talk to relatives hoping to escape to Europe, like many Eritrean nationals. ($1 = 0.8893 euros) (Reporting by Wladimiro Pantaleone Writing by Crispian Balmer Editing by Philip Pullella and Frances Kerry)
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