By Amy Sawitta Lefevre and Andrew R.C. Marshall

BANGKOK (Reuters) - Accusations of corruption involving a park built to honor Thailand's revered monarchy are threatening to damage an anti-graft drive by the ruling junta, which seized power last year vowing to clean up government and protect royal prestige.

The accusations, leveled by some Thai media and opposition groups, have transfixed a country anxious over the declining health of the long-reigning King Bhumibol Adulyadej, 87.

They come amid a widening police investigation into corruption involving two nationwide cycling events, also aimed at celebrating the royals, in which two suspects have died in military custody.

The army said on Friday an internal investigation found no graft in the construction of the 1 billion baht ($28 million) Rajabhakti Park, near the royal resort town of Hua Hin. The project was overseen by General Udomdej Sitabutr, a former army chief who is currently deputy defense minister.

"There isn't any (corruption) at all. If there were any, I wouldn't let this go, that's all I'm going to tell you," army chief General Teerachai Nakwanich told reporters, announcing the results of the military probe.

Teerachai was the latest in a succession of top junta leaders, including Prime Minister Prayuth Chan-ocha, to publicly stress there were no irregularities in the use of private donations raised for the construction of the park.

Yet allegations made by anti-junta groups of irregularities in the project's funding persist in the Thai media, and a usually subdued opposition has seized a rare chance to score political points.

"Can people still trust the junta?" said Thanawut Wichaidit, a spokesman for the United Front for Democracy against Dictatorship, or "red shirts", which backed the government toppled by the military in 2014.

General Udomdej, who oversaw the project, told reporters on Nov. 10 that there was "an element of truth" to media and opposition allegations that an unnamed civilian had demanded bribes from the foundries that cast giant statues of past Thai kings for the park.

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"But everything has died down now and it is all above board," he said, without elaborating further.

On Tuesday, the defense ministry said it was setting up its own committee to investigate the construction of the park, which was opened by Crown Prince Maha Vajiralongkorn in September. It will be headed by the permanent secretary for defense, General Preecha Chan-ocha, the prime minister's brother.

DEATHS IN CUSTODY

The accusations of kickbacks relating to the park project have been raised in the widespread coverage by Thai media of separate cases involving the organization of two cycling events, "Bike for Mom" and "Bike for Dad", aimed at honoring the king and queen.

Those events, in August and December this year, are seen as aiming to boost the image of Crown Prince Vajiralongkorn, who does not enjoy the same level of popularity as his father.

Since October, seven people involved with the events, including two army officers, have been charged by the authorities with using the monarchy's name for personal gain.

They were charged under Thailand's strict lese majeste law that provides for sentences of up to 15 years per count for insulting the monarchy. Two have since died in custody.

Prakrom Warunprapa, a police major charged with falsely claiming close royal connections to raise funds, was found hanging by his shirt in his cell at a military base on Oct. 23, officials said.

A second suspect, celebrity-fortune teller Suriyan Sucharaitpalawong, who had been the main organizer of the August cycling event, died two weeks later in the same military prison. Better known as "Soothsayer Yong," he succumbed to a blood infection, the corrections department said.

The deaths prompted the United Nations to urge the Thai government on Tuesday to stop using military facilities to detain civilians and to allow independent experts to investigate.

Police said the two men were represented by lawyers but did not provide details. Reuters has been unable to identify anyone who had represented them.

Both men were cremated within a day of their bodies being retrieved by relatives, contrary to the week-long funeral rites typical in Buddhist-majority Thailand.

Police said a committee had been set up to investigate the deaths and that the cremations were a private family matter.

The authorities have denied widespread speculation of foul play in both mainstream and social media, and issued a statement saying a third suspect, the soothsayer's secretary Jirawong Wattanathewasin, was "alive and well" in military custody.

Police said they filed a case to the military prosecutor on Friday accusing Jirawong of lese majeste for falsely claiming to act on behalf of the monarchy for personal benefit.

A fourth suspect, army Colonel Kachachart Boondee, has fled abroad, say police. Kachachart has been charged with defaming royalty and abusing his authority for personal gain, according to documents filed against him by a unit of the Thai military.

Reuters was not able to establish if either man had appointed a lawyer.

Police issued warrants against three more suspects on Wednesday, also on charges under the lese majeste law.

LESE MAJESTE

The laying of lese majeste charges in the corruption cases arising from the cycling event fits with a pattern of increased use of the law in recent years, legal experts and human rights monitors say.

Since the army seized power in May 2014, Thai authorities have charged at least 54 people with lese majeste, and courts have handed down record jail sentences of up to 60 years.

It is also the second time in the past two years that lese majeste charges brought in corruption cases have touched the wider circle of the crown prince.

In 2014, Princess Srirasmi, the crown prince's third wife, relinquished her royal title following the arrest of several of her relatives and six police officers on charges of extortion, operating gambling dens, accepting bribes and exploiting the name of monarchy for personal gain.

Among those arrested was Srirasmi's uncle Pongpat Chayaphan, then the chief of Thailand's Central Investigation Bureau.

Pongpat has been sentenced to more than 36 years in jail for crimes including lese majeste, bribery and intimidation.

(Additional reporting by Panarat Thepgumpanat, Aukkarapon Niyomat and Patpicha Tanakasempipat; Editing by Aubrey Belford and Alex Richardson)