Chen was scheduled to defend him-self publicly last weekend against charges that he, his wife and key aides had misappropriated some $450,000 from a discretionary state fund; the indictment claims the money was used to buy everything from a diamond ring for the First Lady to baby clothes for Chen’s grandkids. Chen’s defense had been that the money was spent on secret diplomacy and could not be accounted for due to national-security concerns. But prosecutors say they’ve found scant evidence of such use. Already embattled, Chen now faces renewed street protests and another opposition-led recall vote in the legislature. If he steps down or is ousted before his term expires in 2008, Lu is in line to take over.

Putting Lu in charge, however, might only spark wider political tensions. Lu is seen as even more staunchly pro-independence and just as unpredictable as Chen. While a President Lu would be sharply constrained by the opposition-controlled legislature, her ascent would likely rattle nerves in Beijing and Washington, which already have their hands full with North Korea’s nuclear gamesmanship. At home, her prickly, outspok-en personality would make it difficult for her to play a unifying role. “We can expect the coming months to be very messy,” says former national-security adviser Antonio Chiang.

The source of that mess is ironic: Chen fell into a trap of his own design. He made his name as a legislator in the early 1990s exposing corruption committed during the 38-year military rule of the Kuomin-tang party. In 2002, during his first term as president, Chen vowed closer oversight of state funds following reports that his KMT predecessor had a secret war chest for conducting diplomacy abroad.

Chen’s fall shows that the judiciary has real teeth–a healthy sign for Taiwan’s young democracy. But that means more scandals may be coming. One example: though the drive to oust Chen has drawn most of its recruits from the KMT-led opposition, a bill is in the works to force the KMT itself to give up party-owned land and businesses improperly acquired during the martial-law era. “Even the president or his family can be put under in-vestigation,” Hsu Yung-ming, a research fellow at Academia Sinica in Taipei, says of the current crisis. “That may be bad for [Chen] now, but in the long run it’s good for Taiwan.”