John Colmey and David Liebhold, Jakarta - In the financial world they call it the poison pill, a labyrinth of cross-vested interests designed to protect a company from hostile takeover. In Indonesia, it was known as the New Order, or sometimes Suharto Inc. The principal ingredients: a military deeply enmeshed in politics and business, the rigorous indoctrination of schoolchildren to trust in the wisdom of the state, and a political structure based on enforced "consensus," designed to look democratic but to serve and approve the actions of a single leader. Backed by terror and a patronage system that guaranteed a lifetime of riches for every compliant minister, general and tycoon, the New Order ensured former President Suharto 32 years of uninterrupted power. The system made the most complicated American multinational look like a mom-and-pop store.

So it should come as no surprise that eight months after Suharto stepped down – or "stepped aside," as some local analysts prefer to call it – the Smiling General is back and pulling some strings. The power of his chosen successor, B.J. Habibie, is rapidly draining away as he proves incapable of stopping a nationwide wave of bloodletting that increasingly bears the marks of an orchestrated campaign. The investigation into allegations that Suharto and his family systematically stole and stashed away billions of dollars has ground to a halt. The reform movement that pushed the 77-year-old Suharto from power is leaderless and in disarray, as more than 100 parties prepare to compete in a national election in June that has voters confused. Much now depends on General Wiranto, the head of the Armed Forces. Wiranto, a former aide-de-camp to Suharto, must decide between his pledge to protect his former commander-in-chief and his loyalty to the nation. But as chaos reigns, Suharto has seized the moment to try to reassert his power, whatever the cost to Indonesia. "He's acting like a Javanese king," says Muslim leader Amien Rais. "In ancient times, if the king collapsed, the people had to go along with him. So he thinks if he's going to collapse, he'll bring the whole country down too."

The first to publicly accommodate Suharto's reemergence in the political arena was a man who knows him well – Abdurrahman Wahid, Indonesia's most influential Muslim leader and head of the 40-million-strong Nadhlatul Ulama Muslim organization. In December, Wahid shocked his followers when he suggested, following a meeting at Suharto's home, that the former President should be invited to join discussions over the nation's future, if only to stop him from intervening from behind the scenes. In the past two months, Wahid, whose National Awakening Party is expected to win 20% of the votes in June, has become a regular visitor to Suharto's home. While he says that, if elected, he would put the former strongman on trial, Wahid is now calling on Indonesia's students to stop their protests against Suharto and his family, whose Jakarta homes are guarded day and night by scores of troops. Wahid says the Suharto-bashing should be temporarily shelved, in the interest of national stability: "I'm trying to save them from the students for the sake of economic recovery."

Even before Wahid adopted his conciliatory stance, it was already evident that the investigation into the former President's alleged abuses of power was more show than substance. In June, during the early euphoria of reformasi (the student-led movement against nepotism and corruption), then Attorney General Soedjono Atmonegoro asked for full independence – "just like in America" – to conduct a probe of Suharto. He was fired on June 15, five hours after he submitted to Habibie his first report, which alleged that Suharto had misused billions of dollars amassed by charitable foundations. Habibie replaced Soedjono with three-star general Andi Ghalib, a Suharto loyalist. Despite a marathon 12-hour questioning of the ex-President's businessman son Hutomo Mandala Putra ("Tommy") last week, Ghalib has so far declined to lay charges against Suharto, or even name him as suspect. "The investigation is not going anywhere," says Soedjono. Like many others, his early faith in reformasi is waning. "I must have been dreaming," he now says.

The crucial event in Suharto's rehabilitation came on Jan. 4 in the reshuffle of some 100 top military officials. The day before the reorganization, General Wiranto held a lengthy consultation with his former commander-in-chief. The shakeup was lauded for purging radical Islamic allies of Suharto's son-in-law Prabowo Subianto (who now spends part of his time in self-imposed exile in Boston). At the same time, however, the move shored up Suharto's influence within the army.

Two of the military's most senior posts, including General Affairs Chief and Intelligence Chief, were filled by men who, like Wiranto, were former Suharto adjutants. "I don't trust Wiranto at all," says Muslim leader Rais, a leading presidential candidate. "He can't distinguish between his loyalty to Suharto and his loyalty to the people."

Meanwhile, the violence that has plagued most of Indonesia's 27 provinces has intensified this year, recently spreading to the historically tranquil island of Ambon, in eastern Indonesia, where more than 60 people died last month in clashes between Muslims and Christians. Although dire poverty and rising unemployment (already nearly a quarter of the workforce) has put the entire nation on edge, a disturbing pattern has emerged from the unrest, dating back at least to the Jakarta riots in May. The incidents typically begin with the arrival of strangers, followed by an argument with a shopowner or an ethnic or religious slur. Within hours whole towns are in flames. As with a string of other recent riots, from Jakarta (14 killed in Ketapang in November) to northern Sumatra (29 killed in Aceh since December), many locals in Ambon believe the violence was deliberately incited. Catholic priest Ansius Homenara says that, on the first day of the savagery, Jan. 19, two men on motorcycles rode through Ambon screaming, falsely, that churches had been burned. Many of those arrested told police that the unrest had been directed from Jakarta. Concludes the priest: "There were definitely provocateurs."

In densely populated East Java, a mysterious spate of gruesome "ninja-style" murders has gone on for more than six months, and the death toll now exceeds 200. Here again, nobody regards these as ordinary crimes, but the authorities have been unable – or unwilling – to identify the perpetrators. As Indonesians lose confidence in law enforcement, suspicion grows that Wiranto is allowing the unrest to spread – at best, because he is afraid to move against the provocateurs; at worst, because the military itself may be involved. In an October survey conducted by the Jakarta Post and the D&R newsweekly, 92% of respondents said they believe the East Java violence was being orchestrated for political ends. The lack of high-level arrests is especially alarming given that the Armed Forces' intelligence service – headed by another Suharto loyalist – has operatives or paid informers in virtually every town and village across the country. While sources close to Wiranto say he is personally dedicated to free, fair and punctual elections, many are convinced that the military leader must know the truth about the East Java bloodbath. Says Marzuki Darusman, chairman of the National Human Rights Commission and parliamentary chief of the ruling Golkar faction: "Wiranto knows everything."

Even more disturbing are reports that Suharto loyalists may be conspiring to prevent the June elections from being held. Highly placed sources tell Time of a detailed plot, believed to include the Suharto family, to incite large-scale rioting across Indonesia as a prelude to the imposition of martial law. The operation calls for the installation of a transitional military leader acceptable to both the international community (specifically, the International Monetary Fund and the World Bank) and the Muslim lobby, followed by a full pardon for the Suhartos and a three-year transition to democracy. "They are afraid of legal proceedings," says one of the sources. "They think they'll have an easier time under martial law than under a legitimate [elected] government."

Even if the various conspiracy theories turn out to be far-fetched, Suharto and his family are well-positioned to influence the outcome of both the general elections and the presidential vote scheduled for October. With tens of millions of Indonesians struggling to feed themselves, vote-buying is a given, and the Suharto family is allegedly funding various parties. "There will be a lot of money politics," says Irma Hutabarat, member of Indonesian Corruption Watch, a recently established nongovernment organization. "And who has the money here? The Suharto clan."

In the small villages where most Indonesians live, three decades of authoritarianism have left many voters unable to comprehend the opportunity offered to them by the coming election. Unlike the government in neighboring Thailand, which has conducted extensive public education on the constitutional and democratic processes, the Habibie administration has so far failed to impart even basic information about the June poll, which will be the first free election in Indonesia since 1955. In the Pandeglang district of West Java, villagers are perplexed by the list of new and unfamiliar political parties that have sprung up over the past few months. "I don't understand what I must do," sighs Rasta, 40, a landless farmer. "I'll do whatever I'm told." But who's giving the orders?