RAMALLAH, West Bank, June 7 (Reuters) - A special anti-graft court on Thursday convicted an aide of late Palestinian leader Yasser Arafat of embezzling millions of dollars, in the biggest corruption case in the Palestinian Authority's 20-year history.

Mohammed Rashid and two other businessmen were sentenced in absentia to 15 years in jail and ordered to return $33.5 million in funds stolen during Arafat's rule.

Rashid, an Iraqi Kurd who worked as a financial aide for Arafat for more than a decade, denied the charges and accused Palestinian President Mahmoud Abbas of leading a witch-hunt against his predecessor's allies.

Prosecutors told the court, which was set up by Abbas two years ago, that Rashid profited from front companies and fled abroad after Arafat's death in 2004.

Speaking from London, Rashid dismissed the conviction. This is a political court, he told broadcaster Al Jazeera, and defending his decision not to face the charges in person he added: The legal environment is not safe.

Rashid had accused Abbas and his family of owning assets worth tens of millions of dollars.

Rafiq Natsheh, head of the Palestinian Authority's anti-corruption commission, denied suggestions that Rashid's trial was politicized.

This is only one of several files we are currently working on, he told Reuters. Those guilty (of financial wrongdoing) cannot go on undetected.

Allegations of rampant corruption dogged Arafat's rule. Locals accused the leader of turning a blind eye to graft within his inner circle as donor aid poured into the West Bank and Gaza Strip following the 1993 Oslo peace accords. (Writing by Noah Browning, additional reporting By Ali Sawafta and Jihan Abdalla; editing by Crispian Balmer, Robert Woodward and Pravin Char)