Harman Banger and his wife Neena Kumari were both found guilty of fraud by false representation at Birmingham Magistrates Court after a seven-day trial.
The couple had claimed Kumari was eligible for a Covid business grant for Pizza Plus, a takeaway on The Orchard, Bilston, in April 2020.
However, when Wolverhampton Council's counter-fraud team took a closer look they found the premises was boarded up and did not even have electricity.
Instead of admitting wrongdoing immediately, the former cabinet member for the economy tried to convince the court they had a business by calling several witnesses who claimed they regularly ate from Pizza Plus.
However, a lack of paperwork, invoices, marketing resources and tax returns for the business meant the couple's charade collapsed.
Banger resigned from the cabinet when the fake grant allegations surfaced in June last year and the Labour Party suspended him pending the outcome of the trial.
The hearing did not have a jury but was instead ruled upon by District Judge David Murray who had sat through all the evidence.
He said to Banger: "There was not a business and you did try to obtain the grant by false representation. Then you employed sophisticated methods to bolster your case that the business was open. I find you guilty."
Addressing Kumari about continuing with the "fiction" of the open business, he said: "It is your right not to give a comment at the police station or give evidence, but it gives the impression you would not have stood up to cross examination."
He ruled they were guilty and sent the case to Birmingham Crown Court for sentencing due to the severity of the offences.
Wendy Stevens, specialist fraud prosecutor at CPS, said: "As a trusted, elected official, Harman Banger abused his position of power alongside his wife Neena Kumari in order to de-fraud the public at a time of national crisis.
"Banger had a deep understanding of the eligibility of such Covid-19 business support schemes and tried to exploit the system by claiming for a business that the pair knew was not eligible."
She added: "Fraud is not a victimless crime and can affect anyone at any time. The CPS is committed to bringing fraudsters, including those who have exploited the Covid-19 pandemic for their own gain, to justice."
The couple refused to comment outside the court after being found guilty on Friday and were released to appear before Birmingham Crown Court on January 14 for sentencing.