Mahboob Hussain, who served as deputy leader of Sandwell Council, was booted out by Sir Keir Starmer's party on the eve of the Labour conference.
Sources told the Express & Star the move is part of Labour's plan to "clean up" the issues surrounding elected members and officers that have dogged the authority for years.
Mr Hussain quit his position as a councillor in Oldbury ahead of the 2018 local elections, but is understood to have continued to play an influential "behind the scenes" role in Sandwell politics.
He was at the centre of the explosive Wragge report in 2016, which contained allegations of crooked property deals and led to a series of costly court battles and claims of racism.
Mr Hussain was initially suspended from the Labour Party in 2016, and apart from a brief period of reinstatement, he has been suspended ever since.
It is understood that his case was heard by Labour's National Constitutional Committee last week and he was informed of his expulsion in recent days.
No official reason for his expulsion has been given by the Labour Party.
Mr Hussain has been a high-profile figure in Sandwell politics for decades.
He was sanctioned by the authority in 2018 for "abusing his position" over claims he had pushed through the sale of three public toilets well below their market value to a family friend, and was also said to have instructed officers to reduce or cancel three parking tickets for family members.
The allegations were originally brought to light in the Wragge report, which also featured Mr Hussain's son, Azeem Hafeez, a former Sandwell Council employee who is currently at the centre of a scandal involving a £20 million school transport contract.
A police investigation into the allegations in the Wragge report was closed without any action being taken, and Mr Hussain has always denied any wrongdoing.
Sir Keir has vowed to change the culture in Sandwell's ruling Labour group, which was plunged into further turmoil in this year's local elections after losing 11 seats to the Tories amid resignations and rows over candidate selections.