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Putin's dilemma: loyalty or honesty?

Saturday's return of a mentor linked to corruption tests Putin's resolve to clean up Kremlin graft.

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The case of Pavel Borodin, the former top aide to Boris Yeltsin accused by Swiss police of laundering $30 million in bribes, could confront President Vladimir Putin with a difficult choice: protect his former political godfather or keep his pledge to clean up a decade-old system of Kremlin power abuse.

Mr. Borodin, who headed the Kremlin's shadowy Property Department for seven years, returned to Moscow last week after the Russian government posted his $3 million bail amid signs the Swiss case against him might be collapsing. But though Borodin has been linked to a blizzard of corruption charges stemming from the Yeltsin years, his more destructive legacy is a continuing system of Kremlin patronage that keeps Russia's Supreme Court judges, parliamentary deputies, and top government officials in a state of abject dependence, say experts. "If Putin does not deal with this, there will be no democratic reform in Russia," says Yury Skuratov, the former Russian prosecutor who opened the case against Borodin in 1999.

The Property Department, which Borodin headed, was an empire of former Communist Party and Soviet government holdings that included more than 200 state-owned businesses with 100,000 employees and assets worth an estimated $650 billion, or roughly twice Russia's gross domestic product.

Borodin told an interviewer in 1998 that his department had an annual income of at least $2.5 billion. The figures cannot be checked, since the accounts have never been published, nor are they included in the state budgets regularly submitted to parliament. "The scale of operations that Borodin oversaw was huge, and the cash flows were unaccountable, and that looks like an irresistible invitation to corruption," says Alexander Konovalov, an analyst with the independent Institute of Strategic Assessments in Moscow. "No one really knows what went on there, and to this day it is off limits to investigation."

In effect, Borodin was quartermaster and chief steward to the entire Russian government. Any Duma deputy, judge or government official who wanted a state-provided flat, the use of a car, country dacha, a subsidized vacation, medical treatment or even a new suit, had to appeal to the Property Department. Through Borodin, "the Kremlin could manipulate and influence the entire state apparatus."

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