Inside Influence Inc.: Welcome to Washington's lobby firms--they represent the capital's fastest-growing industry, one increasingly controlled by American and foreign conglomerates. (Policy and Politics).

IN WASHINGTON, more than one CEO has learned the power of the checkbook. With a few well-placed campaign contributions--preferably to members of both parties--and the help of a high-profile lobbyist or two, a CEO can meet with key lawmakers and perhaps get the kind of attention he or she wants.

But it can be expensive, as Samuel Heyman, chairman of GAF Corp., a building materials manufacturer in Wayne, NJ, found out. Heyman spent more than $7 million to hire a slew of lobbyists, including former Arizona Democratic Senator Dennis DeConcini and Scott Hatch, son of the powerful Senate Judiciary Committee member Orrin Hatch, in what has been an unsuccessful legislative effort to limit the liability of former asbestos producers. GAF, which stopped making products with asbestos before Heyman took control in 1983, has already paid more than $1.5 billion in legal expenses and claims to workers suffering from asbestos exposure, and some 100,000 claims are still outstanding. The company filed for bankruptcy last January to limit its liability.

Heyman is far from alone. Most CEOs have learned--sometimes the hard way--what Bill Gates failed to understand when he stayed home as the Justice Department started its antitrust investigation of Microsoft: Corporations ignore Washington at their peril. Like it or not, the Capitol's tangle of laws, rules, and regulations affects everyone.

"You can't just keep your head down and escape the government," says Jim Albertine, president of the American League of Lobbyists and a partner in Albertine Enterprises. "The government is a behemoth. Government at all levels has become part of life."

Today's persuasion tactics typically involve teams of lobbyists and experts on both sides of an issue, as Heyman's experience on asbestos demonstrated when his team's efforts were effectively countered by lobbyists for the trial lawyers.

"You simply can't lobby an issue anymore without it being part of an overall triad of issue management," notes John Stauber, executive director of the Center for Media and Democracy, a nonprofit public interest group that keeps tabs on the public relations and lobbying industries. Issue management, Stauber explains, incorporates lobbying, public relations, and mass media advertising--remember the Harry and Louise advertising campaign that helped defeat the Clinton health plan?--to mold public opinion and mobilize grassroots constituents to put pressure on important members.

Much of the most visible lobbying is carried out by mega firms like Cassidy and Associates; Patton Boggs; and Verner Liipfert. And these big names are becoming even bigger because of a wave of consolidations and buyouts. For instance, the public relations firm of Shandwick International (now Weber Shandwick Worldwide) purchased three major lobbying firms, including top money earner Cassidy and Associates, and then in turn was taken over by Interpublic Group, a New York communications conglomerate.

WPP Group, a British advertising holding company, purchased seven Washington-based lobbying and public relations companies, including the Wexler Group and Timmons and Co., both consistently ranked among the most effective. Accounting firms have also become powerhouses. PriceWaterhouseCoopers owns the sixth-largest lobbying practice and, not to be outdone, Ernst & Young recently merged with Washington Counsel, the eighth-largest firm.

Washington's Most Lucractive Industry

With some 17,000 registered lobbyists working in Washington, corporations have access to a vast talent pool. However, any count invariably underestimates the scope and extent of the business, since so much activity falls below the radar screen. Twists in the law mean that some of Washington's most influential movers and shakers never have to register. Bill Shingleton, the lobbying expert at the Center for Responsive Politics, a nonpartisan, nonprofit research group that tracks money in politics and elections, explains that the legal definition is very narrow and only counts money spent on direct contact with members of Congress, the executive branch, or their staffs. Legal fees are not counted, nor is money spent on grassroots efforts. That's one reason the representatives of the National Rifle Association, for instance, a group that relies on grassroots persuasion, has surprisingly few registered lobbyists. Nor does it take into account the substantial contributions of public relations specialists who mold p ublic opinion and focus press attention on issues but, technically, are not lobbying.

Corporations with deep pockets have made lobbying Washington's fastest-growing and most lucrative industry. The Center for Responsive Politics reports that lobbying revenues topped $1.4 billion in 1999 (figures for 2000 are due in late fall). Nearly 130 firms collected more than $1 million each in fees.

For all the money CEOs spend there, though, Washington remains foreign territory. Some "think there is something smarmy about politics," observes Leon Billings, president of Leon G. Billings Inc., a public policy consulting concern, and a Democrat in the Maryland legislature. He learned his way around the corridors of power years ago as a top aide to the late Senator Edmund Muskie, a Maine Democrat. He says many CEOs have "deep antagonism toward government," and "are inclined to be pig-headed when dealing with Congress and regulatory agencies."

Corporate Survival at Stake

That attitude vanishes when a corporation's survival is at stake, Billings adds. He recalls a complex regulatory-legislative issue where a CEO went to Washington to meet with an influential senator who then brought it to the attention of the President. The agreement that came from the meeting saved the company, Billings says, but "if it had just been me, the lobbyist, and an officer of the company, the issue would not have caught the attention of the senator.

When he undertook his lobbying offensive, GAF's Heyman thought being an outsider was an advantage "because you come with no preconceived notions of what can and cannot be achieved within the system."

Not all lobbyists agree. "For all the brilliance there is at the CEO level, there's a lot of naivete about how you can really affect policy in Washington," says Terry Bracy of Bracy and Williams, another experienced lobbying firm.

That's the reason CEOs need a "pathfinder," emphasizes Bob Livingston, a former Republican Representative from Louisiana who was close to being named Speaker of the House before he resigned in 1998. Although he is a relative newcomer to the lobbying game, Livingston obviously knows his way around the halls of Congress and how to pitch for a client.

He defines a pathfinder as someone who has been there and knows how to operate in an environment where 20,000 bills are introduced and maybe 2,000 become law. "A CEO knows how to run a business and how to make a profit," says Livingston, "but it takes somebody with hands-on experience in dealing with Congress and the administration to pierce through the veil of bureaucratic morass that's unfamiliar to the CEO." Livingston now heads the Livingston Group, which in its first year earned $1.14 million. "Most business people have no idea what it takes to get legislation passed," he contends.

While CEOs can go to Washington and spend time and money trying to solve a problem, veteran lobbyist Jim Albertine observes that in the long run "it is much better to make it part of your corporate culture." This usually means hiring a lobbyist--or dozens, as Bill Gates now does--to represent a company's interests in the capitol. The software giant is now the computer industry's biggest lobbyist. Last year it paid out more than $6 million to influence the Clinton administration and other officials.

Lobbyists like working directly with the person at the top. CEOs know where they want their company to go, and they don't need to worry about covering themselves the way those below them do, notes Eric Dezenhall, a partner in Nichols-Dezenhall, which specializes in crisis management. Billings says, "It's easy to get access to people in power with a CEO in tow." Congress members are politicians but "they are also vain enough to want to know important people," he says.

The need for access is one reason why campaign-financing reports show that corporations and lobbyists donate roughly the same amount of money to political campaigns as they spend on lobbying. Shingleton notes that making contributions and hosting fundraisers help get a foot in the door, now that strict ethics rules have done away with the expensive dinners and gifts that once served that purpose. Microsoft, for instance, contributed $100,000 to the Bush-Cheney Inaugural Fund.

Restrictive ethics rules have also made it harder for outsiders to get established in Washington and have placed a premium on former lawmakers and staff members, especially those who served on or worked for key committees. Shingleton, of the Center for Responsive Politics, which is financed by foundation grants and individual contributions, counted 129 former members of Congress among active lobbyists in 1999, split almost evenly between political parties.

From Capitol Hill to Corporate Board

Of the 50 members of Congress who retired in January nearly one third, most of them Republicans, joined lobbying or government affairs firms, as did a number of retiring Clinton administration officials.

By law, former members of Congress, staffers, and members of the executive branch have to wait a year before they can become active lobbyists. However, that doesn't preclude them from serving as members of corporate boards--where former officials-turned-lobbyists are increasingly finding homes. They may also become consultants or strategists, as Bob Dole did when he joined the law firm of Verner Liipfert, where former Democratic senators George Mitchell and Lloyd Bentsen are also members. Shingleton reports that Matt Salmon, an Arizona Republican when he served in the House, was one of the most sought-after new retirees because he is fluent in Mandarin and could advise clients about the China market in the year before he could officially start lobbying. He joined APCO Associates, a public affairs and communications concern that works with a number of Chinese business leaders.

At the start of the Bush Administration, with Republicans also controlling both houses of Congress, GOP lobbyists were in demand. Yet most firms have learned to hedge their bets.

"Today, it's dangerous not to have a lobbyist dealing with both sides and also someone known to have access to members," says Billings. Most firms have taken that route. The partner of Anne Wexler, a former aide to President Jimmy Carter, is Bob Walker, a former congressman from Pennsylvania and long-time member of the House Republican leadership. A former aide to President Ronald Reagan, Kenneth M. Duberstein works with Michael Berman, at one time an adviser to Vice President Walter Mondale. And Anthony Podesta, whose brother was President Clinton's chief of staff, has joined forces with a Republican, Daniel J. Mattoon, who served on the Bush-Cheney transition team.

The notable exception is the solidly Republican firm of Barbour, Griffith and Rogers, one of the biggest names in lobbying. As a former head of the Republican National Party and one of the party's most successful fundraisers, Haley Barbour helped elect many Republicans in power. The firm's clients include Federal Express, Mercedes-Benz, Delta Air Lines, and most of the tobacco companies.

But even with its contacts, access to information, and all the money of the tobacco industry, the influential firm could not defeat the information that came out. That's why CEOs need to realize that lobbying will take time, perseverance, and sometimes the choice of a niche firm.

Boutique Lobby Firms for Niche Problems

"Most major corporations tend to believe that when they have an issue with the government they need to hire a name law firm," says Billings, who thinks the reason for this is simply that "big names look better" to shareholders. "If they hire an established name and the outcome is disadvantageous, they can pull the name out and use it as a defense," he explains. To hedge their bets, most corporations that can afford it hire not one, but many lobbyists to press their agendas.

Yet big names may not always be best. When corporations ask him who they should hire to represent them in Maryland, Billings often recommends smaller firms that usually have expertise in a specific area and can give clients more individualized attention.

"Large firms may have the name, but boutique lobbyists can have political and substantive value larger firms can't provide," he says.

Whatever the issue, Washington's plethora of lobbying talent gives CEOs plenty of expertise to choose from. The trick is to find the right person or combination of people to do the job and, if the experience of others is any guide, to become directly involved.

As more than one CEO has learned, notes Billings, it's wise to heed the dictum, "if you want a job done well, do it yourself." If that involves overcoming qualms about politics and getting out the corporate checkbook, well, that's life inside the Beltway.