The figure at the center of the storm over alleged Kremlin corruption is a quiet hulk of a man, little known to the Russian public, in the seemingly banal job of supervising supplies and property. Few would assume that he might know the secrets of President Boris Yeltsin's family finances or pose any threat to Yeltsin's regime.
Yet from a plain brick office building with a scruffy entrance, Pavel Borodin manages a multibillion dollar empire of breathtaking scope, encompassing 200 state-owned businesses, palaces, planes and other assets. A survivor of countless staff upheavals, he is one of few in the Kremlin who answers directly to Yeltsin, via the pale yellow phone that sits on the right side of his desk.
Borodin's press secretary suggests, without too much exaggeration, that Borodin is second only to Yeltsin in his ability to "pull the levers of power." And levers he has: As the chief dispenser of perks, he hands out the dachas once enjoyed by the Soviet elite, the Mercedes-Benzes that race down the VIP lane of Moscow's streets, the vacations at the state-owned resorts, and much more.
For years, no one questioned how Borodin kept up the government's palaces and planes. Now a Swiss-led criminal inquiry into Kremlin building contracts has unsettled the president's inner circle. Investigators are looking into whether Borodin and others accepted bribes from the Swiss-based contractors, and whether profits were skimmed from a huge oil sale meant to help fund the $800 million project.
Prosecutors have uncovered a series of front companies and offshore entities that transferred millions of dollars to several dozen Swiss bank accounts, according to sources familiar with the inquiry. Investigators believe they have linked the accounts to Borodin and others in his department or to firms that may be connected to them, the sources said.
The inquiry has touched Yeltsin because one of the Kremlin contractors, Mabetex Project Engineering, allegedly paid tens of thousands of dollars in credit card expenses for the Yeltsin family and transferred $1 million to a Budapest bank account for Yeltsin's use, supposedly on his 1996 re-election campaign.
After first ignoring the allegations, the Kremlin is issuing stronger and stronger denials. On Friday, Dmitri Yakushkin, Yeltsin's spokesman, said the Western press is reporting "unverified facts" and "discrediting the Russian government system." This "may boomerang and harm our relations with the West," he said.
Yeltsin last week denied that he has any foreign bank accounts. His wife, Naina, has said false allegations of gratuities have hurt her whole family.
In an interview last week, Borodin said he is amazed to be suddenly portrayed as a possible channel of illicit funds to the Yeltsins. "Before, who knew this great manager?" he said, adding that now, "I am corruption figure number one."
The charges are "just wild, absurd," he said. "We have dirty politics here. They are trying to get into power using all means. Whatever they write about me, it's there to deceive."
The suggestion that Borodin might play an important, confidential role in the government is not entirely new. Four years ago, Roger Tamraz, an American seeking to build a trans-Asian oil pipeline, told the CIA that Borodin and Alexander Korzhakov, then head of security for Yeltsin, had met him in Milan. He said Korzhakov promised Yeltsin's support in exchange for a $100 million donation to Yeltsin's 1996 re-election campaign. Borodin has denied the entire story.
So far, Yeltsin continues to stand by Borodin. Indeed, in a government that discards prime ministers like used memo pads, Borodin's 6 1/2-year tenure is almost a record.
An amiable man with a lop-sided grin and a love of anecdotes, Borodin, 52, is close enough to Yeltsin to be invited on trips with him, and, before Yeltsin's doctor forbade it, to hit a tennis ball with him. A book by Korzhakov includes photos of Borodin, slightly taller and even broader, standing next to his boss in athletic shoes and bare-chested by a riverside. Borodin's apartment is even in the same brick building in western Moscow where Yeltsin lives with his wife and two daughters.
Borodin nonetheless says he doesn't relax with Yeltsin. "It is strictly a businesslike relationship," he said. "There is no question of friendship; he is my boss."
Borodin's freedom to operate outside the normal chain of command disturbed more than one Kremlin aide. Anatoly Chubais, who served as deputy to former prime minister Viktor Chernomyrdin, reportedly tried to force Borodin out. But when Borodin seemed on the verge of losing his job last year, Yeltsin announced Borodin would keep it.
Borodin's special role is dispensing perks, and perks are worth far more than government officials' paltry salaries. Borodin, for example, says his salary rank is the third-highest in the government--14,000 rubles, or $560 a month. But it comes "with many perks," he said. "A car, security, and I fly free." Borodin once declared that he would do his best to preserve privileges for Kremlin officials, saying "it's not right for the good things in life to be enjoyed only by merchants."
His far-flung empire had a modest start. At Yeltsin's invitation, he came to Moscow in 1993 from the Siberian city of Yakurtsk, where he was mayor, to run a small management office of 12,000 people. Now, with the help of 150,000 employees, he runs hotels, a major medical center, automobile pools, airplanes, farms, resorts, a furniture factory, catering offices, drug stores, a photo laboratory, a laundry and a tailor shop. He estimates the value of the property under his control at $600 billion.
There is hardly an official in the Russian government who is not beholden to Borodin. He dispenses medical treatment, vacations, apartments, cars, food and clothing. "It is a huge service," said Borodin simply. Yeltsin made no bones about Borodin's usefulness when he was trying to convince the lower house of the legislature, the State Duma, to approve Sergei Kiriyenko as prime minister in early 1998. He said publicly that he had instructed Borodin to pay special attention to the legislators' requests.
Even Vladimir Ustinov, the acting Russian general prosecutor, is in Borodin's debt. Documents obtained by the Moscow newspaper Versiya and provided to The Washington Post show Borodin allotted Ustinov an apartment worth roughly $400,000 on one of the toniest streets in Moscow. Yet Ustinov is expected to lead the Russian inquiry into Borodin's relationship with Kremlin contractors.
That is nothing unusual. Ustinov's predecessor as prosecutor, Yuri Skuratov, who says he was forced out because he investigated Borodin, ordered 14 suits from Borodin's office. Now Behjget Pacolli, president of the Mabetex construction firm, says he provided Skuratov suits, shirts and underwear for free.
Borodin says he doesn't actually pick who gets what, he just fulfills orders. He is successful at that and his other tasks, he suggests, partly because the operation is self-financing. While other ministers bemoan their sorry budgets, Borodin has his own access to funds, including investments in a huge diamond deposit in Archangelsk.
His office has founded 200 state-owned commercial firms, so many that he has said he can't remember the names of all the subsidiaries. "He is a classical Soviet bureaucrat turning into oligarch," said Vyacheslav Nikonov, a political consultant.
Borodin's method of financing the Kremlin renovation is now an important aspect of the Swiss inquiry. A firm called International Economic Cooperation (MES) was allowed to export 4.5 million tons of Russian oil--worth as much as $500 million--in exchange for giving Borodin's office about $70 million in profits for renovations.
Skuratov, who was briefed by Swiss investigators earlier this year, said they were trying to find out whether Mercata Trading & Engineering, one of the renovation firms, joined in the oil deal. Mercata Trading records list Andrei Siletski, Borodin's son-in-law, as vice president.
A spokesman for MES denies Mercata was involved, and says the entire deal was aboveboard. Borodin says he didn't pick either oil export firm or the renovation contractors.
He says his son-in-law never worked for Mercata Trading, and the corporate documents are false. "Those are not documents--those are copies of documents. And you can manufacture any type of copy," he said.
CAPTION: Pavel Borodin allocates a huge store of assets owned by the government.