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Hong Kong's Beijing-backed Phoenix magazine said this month that the court-martial of Lieutenant-General Gu Junshan would become the biggest military corruption scandal since the Communists swept to power in 1949. The magazine, part of the same stable as Phoenix TV which was the first to report the downfall of Shanghai Communist Party boss Chen Liangyu in 2006, said Gu had built a lavish estate in central Beijing, but did not give further details or say how much money was involved. The downfall of Gu, 56, who was sacked earlier this year as deputy director of the People's Liberation Army General Logistics Department and taken into custody for questioning, is the latest in a string of political scandals ahead of the party's 18th congress, which opens on November 8. It has hurt the chances of promotion of General Liu Yuan, political commissar of the Logistics Department, to either vice-chairman or a member of the party's decision-making Central Military Commission during a one-day post-congress plenum, said the sources with ties to the leadership and the military. "Liu Yuan has become an anti-corruption hero," one source said, adding that Liu had offended high-powered people by uncovering the Gu scandal "which hurt his chances of promotion". "The (Gu) investigation has been completed. It will now enter the judicial process," the source told Reuters, requesting anonymity to avoid repercussions for discussing elite politics. Liu also had close ties to Bo Xilai, a disgraced politician, which had hurt his chances, the sources said. The party expelled Bo last month and accused him of abusing power, taking huge bribes and other crimes, sealing the fate of the charismatic but controversial leader whose dramatic downfall has shaken the leadership transition. State news agency Xinhua said on Friday Bo had also been kicked out of parliament. In helping bring down Gu, Liu sought to portray himself as a bold graft buster with an eye on promotion, but the gambit appears to have backfired because he alienated Gu's protectors and tarnished the image of the military, the sources said. Gu's whereabouts are unknown and he and his family could not immediately be reached for comment. "Gu Junshan has been under investigation for about five months. It's a complex and difficult case ... a double-edged sword guaranteed to give some credibility but cause resentment among peers," a second source said. WAR ON CORRUPTION China's military is undergoing a reshuffle ahead of the congress, but Liu had been left out, the sources said. General Ma Xiaotian was named air force commander on Tuesday, replacing General Xu Qiliang who is tipped to become a vice chairman of the military commission. As part of the shake-up, General Fang Fenghui was named chief of the general staff on Thursday, alongside General Zhang Yang who was appointed head of the General Political Department, which oversees personnel, according to state media. Also on Thursday, General Zhao Keshi was made head of the Logistics Department and General Zhang Youxia was promoted to head of the General Armaments Department. All four and Ma, the new air force commander, are tipped to become members of the military commission, the sources said. Liu, a "princeling" son of former president Liu Shaoqi who was purged and died in prison during the 1966-76 Cultural Revolution, had vowed to fight corruption even if it meant losing his job. Liu declared war on corruption in the PLA during a closed-door talk to about 600 generals in January, sources have said, adding that Liu did not single out Gu, but the latter was relieved the following month. Internet accusations flew at the time. Gu used to oversee the building of barracks and other military projects as director of the Bureau of Capital Construction and Barracks under the Logistics Department. China intensified a crackdown on rampant corruption in the military in the late 1990s, banning the PLA from engaging in business. But it as crept back in recent years due to a lack of transparency, checks and balances and moral decay. In 2006, disgraced Vice Admiral and navy deputy commander Wang Shouye was jailed for life for embezzling 160 million yuan ($25.4 million) in China's biggest military corruption scandal in almost six decades, according to state media and Phoenix. (Editing by Dean Yates and Nick Macfie) World Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above. 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