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Jocelyn Ledward, prosecuting, said Paul Meehan had "deliberately lied" possibly to put himself in an important position in what was then a missing persons inquiry.
She said it was possible that he was attention seeking and was "puffed up" by being important to the inquiry.
District Judge Karen Hammond said Meehan was unreliable.
Neighbour of Tia Sharp's grandmother Paul Meehan gave a detailed and "vivid" description of what she was wearing, the court heard, which delayed police from interviewing Stuart Hazell earlier.
But police had spoke to Meehan about the case three times before he finally said he saw her.
His explanation is that he "confabulated" seeing her - his brain mistakenly filled in the blanks in good faith.
As he was convicted of wasting police time, Paul Meehan, a neighbour of Tia Sharp's grandmother, remained impassive as the verdict was delivered.
But as the hearing was adjourned he sat down and buried his head in his hands.
The last confirmed sighting of Tia was on Thursday August 2 at 4.30pm.
On Monday August 6 as the missing 12-year-old's family were frantic with worry, Meehan told police he had seen her walk past him the previous Friday while he was in his garden.
Paul Meehan, a neighbour of Tia Sharp's grandmother, has been convicted at Croydon Magistrates' Court, of wasting police time by giving a false statement that he had seen the schoolgirl alive when she had already been murdered by Stuart Hazell.