By Benjamin Kang Lim and Ben Blanchard
BEIJING, March 20 (Reuters) - A top retired Chinese general has been put under virtual house arrest while he assists with an investigation into the military's worst corruption scandal in almost a decade, two sources said, an indication the probe might be expanding.
General Xu Caihou, 70, who retired as vice chairman of the Central Military Commission last year and from the Communist Party's decision-making politburo in 2012, was taken to an undisclosed location on Monday for questioning by anti-corruption investigators, the two sources told Reuters.
"Xu Caihou's secretaries, bodyguards and driver have been changed to cut off his links with the outside world," one of the sources said, adding that members of his family had also been detained.
The sources, who have direct knowledge of the matter, said Xu was helping with a probe into Lieutenant-General Gu Junshan, 57, who has been under investigation for corruption since he was sacked as deputy director of the logistics department of the People's Liberation Army in 2012.
Gu is suspected of enriching himself by abusing his position as a senior military officer, in what would be the military's worst scandal since a vice admiral was jailed for life for embezzlement in 2006, sources have previously said.
Xu was one of Gu's main supporters in his rise through the ranks and hence is being implicated in ignoring, or at least failing to report, Gu's alleged misdeeds.
Neither Xu nor Gu could be contacted for comment and it was not clear if either man had a lawyer. Neither the Defence Ministry nor the party's anti-corruption watchdog responded to requests for comment.
President Xi Jinping has talked tough on corruption since taking over the party in late 2012 and then the presidency a year ago.
But Xi is in a dilemma over whether to court-martial Xu lest it undermine the PLA's image and risk splitting the military's ranks, as Xu has many supporters in the PLA, the two sources added.
Xu has offered self-criticism in private to the leadership over his ties to Gu, the sources said. Self criticism in China is a common way of admitting your errors in the hope of more lenient treatment.
"But there is tremendous pressure on the leadership to go after Xu Caihou and Gu Junshan," the second source said.
"Gu Junshan will be expelled from the party and court-martialed soon. Investigations have ended. The case has been turned over to the military prosecutor's office."
Xu had been getting treatment for bladder cancer at a PLA hospital in Beijing before he was detained, the sources said, requesting anonymity because they were not authorised to speak to reporters about the case.
That diagnosis may ultimately get him off the hook, said a third source with ties to the military.
"Xu was Gu's strong backer, but the party will probably not charge Xu because he has cancer," the third source said, referring to the possibility Xu himself would be charged with graft.
Xu was last seen in public on Jan. 20, when state media reported he had attended a Chinese New Year gala for retired military officers, an event President Xi also went to.
Xi has launched a renewed campaign on graft, vowing to go after both powerful "tigers" and lowly "flies", warning, like other leaders before him, that the issue is so severe it threatens the party's very survival.
In an online discussion on the official People's Daily website in August, the military confirmed Gu was being investigated, but gave no details.
In January, the respected Chinese magazine Caixin said investigators had seized objects, including a solid gold statue of Mao Zedong, from Gu's mansion in the central province of Henan.
He also secured professional favours for members of his family, including his brother Gu Xianjun, who was arrested last August for bribery, the magazine said.
In addition, Gu hired authors to concoct heroic tales about his father's revolutionary deeds in an effort to bolster his image in the eyes of China's red aristocracy - the sons and daughters of Mao-era heroes, Caixin said.
China intensified a crackdown on rampant corruption in the military in the late 1990s, banning the PLA from engaging in business. But it has gotten involved in commercial dealings in recent years due to a lack of checks and balances on the military, sources say.
In 2006, disgraced vice admiral and deputy navy commander Wang Shouye was jailed for life for embezzling 160 million yuan ($25.82 million) in China's biggest military corruption scandal in almost six decades, state media said at the time.
Part of Xi's graft fight has focused on the military, with Xi banning alcohol-fuelled banquets and officers from staying in luxury hotels when on work trips, among other measures.
The party has struggled to contain public anger at a seemingly endless stream of corruption scandals, particularly when officials are seen as abusing their posts to amass wealth.
Once high-flying politician Bo Xilai was jailed for life in September for corruption and abuse of power - the worst political scandal since the 1976 downfall of the Gang of Four.
The party is also probing retired former domestic security chief Zhou Yongkang for corruption, sources told Reuters late last year, although the government has yet to make any announcement on that investigation.
Zhou and his family have not been reachable for comment. It is also not clear if he has a lawyer. ($1 = 6.1965 Chinese yuan) (Additional reporting by Megha Rajagopalan. Editing by Dean Yates)