The courtroom erupted briefly in applause Tuesday when King was pronounced guilty in the 1998 slaying of James Byrd Jr., but Judge Joe Bob Golden quickly ordered silence.
The jury began hearing evidence in the penalty phase of the trial on Tuesday afternoon before recessing for the day.
"We win and yet we still lose, because we don't have him back," Byrd's sister, Mary Verrette, said as she left the courtroom after the verdict.
His son, Ross Byrd, said: "All I know is that there's one down and two to go."
King was the first of three white men to go on trial in the slaying.
King leaned forward when the verdict was read, shielding himself from cameras, then sat back in his chair with his fingers on his chin; due to the judge's order, camera crews were not allowed to film the defendant. King's father wept and just across the aisle, members of the Byrd family wept too.
President Bill Clinton praised the verdict, saying that people had joined together across racial lines to demonstrate that an act of evil like this is not what the country is all about.
"The jury has spoken," Clinton said in a statement. "Our work for racial reconciliation and an end to all crimes of hatred in this country will go on."
Jasper County District Attorney Guy James Gray said he expected a quick verdict: "I think any jury in this country would feel the same way. You can't put up with this stuff. You can't tolerate it."
Gray said he expected the jury to begin deliberating King's punishment by Thursday.
In closing arguments before the case went to the jury of 11 whites and one black , Jasper County assistant prosecutor Pat Hardy outlined evidence against King and said it was clear.
"You saw it," he told jurors. "It was obvious the man was dragged to death behind a vehicle.
Prosecutors said King and roommates Lawrence Russell Brewer, 31, and Shawn Berry, 24, all former convicts, offered Byrd a ride as he walked home from a party, drove him to the woods, beat him and dragged him behind their truck with a 24-foot logging chain. Prosecutors argued Byrd was conscious, suffering horribly as he vainly tried to save himself during a part of the way.
They said King probably engineered the murder as a gang initiation and a ploy to attract recruits for a hate group he was founding in Jasper, a town of 8,000 people 100 miles northeast of Houston.
King pleaded not guilty but was ensnared by a circle of circumstantial evidence - much of it his own writing - that showed both his racist beliefs and links to the crime.
Hardy said King and the two other suspects in the killing were like the Ku Klux Klan figures in one of King's many racist tattoos: "Three robed riders coming straight out of hell. ... Instead of a rope, they used a chain, and instead of horses, they were using a pickup truck.
"After they dragged this poor man and tore his body to pieces, they dropped him right in front of a church and cemetery to show their defiance of God, to show their defiance of Christianity, to show their defiance of everything that most people in this county stand for."
In Texas, a jury must find that a felony was committed in conjunction with a killing to convict for capital murder. The capital murder verdict means the jury found that Byrd was murdered in the commission of another crime, kidnapping.
Defense attorneys, while acknowledging there was a "terrible, terrible murder," said the state had failed to prove kidnapping. They said Byrd got into the men's truck voluntarily when they offered him a ride. "Basically, where was the abduction?" attorney Brack Jones asked. "We only have Mr. Byrd voluntarily getting into that pickup. ... He could have jumped out."
Head defense attorney C. Haden "Sonny" Cribbs admitted that King was a racist but blamed his prejudice on a bad experience he had while serving time in prison between 1995 and 1997 for burglary. "This boy had something happen to him in the penitentiary. He became a racist. He became a hater. The bad part about it, that's his right," Cribbs said.
KXAS Dallas coverage of the dragging trial
Testimony during the weeklong trial showed that King joined a racist gang, the Confederate Knights of America, while in prison and became an impassioned advocate of white supremacy. Inmate witnesses said the gang gave white prisoners protection from black and Hispanic gangs.
Brewer and Berry will be tried later, also for capital murder.
"The fair thing was to be found guilty. There was evidence, the preponderance of the evidence, the facts were there. It was not decided on emotion but on facts. That's all we wanted," Verrette, the victim's sister, said.
"The world will know that James Byrd Jr. has lived on this earth ... but he never wanted it to be this way." Jasper Mayor R.C. Horn, who is black, told reporters after the verdict he was happy that justice had been done. "We're a little relieved, but we've got some healing to do," he said.
NAACP President Kweisi Mfume said the case "clearly shouts across the world for the urgent need of this Congress to move quickly to strengthen and to pass anti-hate legislation." "I hope he receives life without parole," the Rev. Jesse Jackson said from New York. "If these three men saw killing as a solution in their sick state, then we in our sober and sane state must know killing is not a solution."
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