The Influence Merchants Lobbyists are a permanent establishment in Washington, and FORTUNE's Power 25 ranking is its undisputed "A" list. New to this year's survey: the best of the hired guns.
By Jeffrey H. Birnbaum Reporter Associates Tyler Maroney, Dustin Smith

(FORTUNE Magazine) – This has been a weird year for Washington legislation. Bills that should have been surefire failed, including ones designed to reduce teen smoking and improve the service of HMOs. Other measures that should have been crushed like bugs in committee, including one that expands not-for-profit credit unions at the expense of the wealthy banking industry, skated to victory.

How could this be? The answers lie far from public view in a region inhabited only by lobbyists, interest groups, and the lawmakers whose votes they seek. It's where some of the nation's most powerful people play an extraordinarily high-stakes game of persuasion, where backs are scratched, arms twisted, favors granted and redeemed. This is where the business of politics really gets done.

Into this murky world FORTUNE's second annual Power 25 survey shines a uniquely valuable light. Think of it as America's most reliable guide to the high-contact sports of lobbying and legislating in the nation's capital. It tells the rest of us what Washington insiders already know: who are the true masters and who the mere pretenders.

As this year's Power 25 survey makes clear, Washington lobbying isn't what you'd expect. The capital's mightiest lobbyists aren't shadowy creatures who shun the spotlight. Many are among the nation's best-known public servants who until recently were Sunday talk-show regulars, and in some cases still are. In fact, the most effective lobbyists spend more of their time wooing voters than courting members of Congress. And for all the talk of money in politics, the greenback doesn't always rule. Many interest groups derive their clout from the size and commitment of their membership, not the net worth of their members.

Like last year's Power 25, this year's list is an impartial, authoritative, and empirical rating of the political strength of major trade associations, labor unions, and other pressure groups. Only the 25 most influential organizations make the grade, as determined by a survey of nearly 2,700 of Washington's savviest operators--including members of Congress, Hill staffers, senior White House aides, and lobbyists. (We name the Power 25 on page 137.)

To get even closer to the action, we've added a second winners' roster this year. With the guidance of our pollsters--Democrat Mark Mellman of the Mellman Group and Republican Bill McInturff of Public Opinion Strategies--FORTUNE asked the same set of Washington insiders to tell us which guns-for-hire lobbying firms, and by inference, which individual lobbyists, are the most politically potent. The top ten are listed on the next page.

Both rankings--the Power 25 and the top ten lobbying companies--contain familiar names and several surprises too. For instance, the Power 25 has a new constellation of stars. The Credit Union National Association rocketed to No. 8 from near the middle of last year's list on the strength of its legislative rout of the banking industry this year. Three well-heeled insurance groups also make their debut, giving a boost to the once-lagging financial services lobby. They are the Independent Insurance Agents of America (No. 12), the Health Insurance Association of America (No. 22), and the American Council of Life Insurance (No. 23). And an unlikely powerhouse, the National Beer Wholesalers Association, has sneaked up to No. 24 from deep in the pack last year. (See story on page 148.)

Many of 1997's stars fell in this year's survey, most noticeably among organized labor. Only two labor organizations remain in the Power 25--the AFL-CIO, which dropped to No. 5 from No. 3 last year, and the National Education Association, which plummeted to No. 21 from No. 9. All eight of the other unions that FORTUNE's poll tested also registered declines, including the strike-ridden United Auto Workers union (UAW), which dropped to No. 39 from No. 26; the legally challenged International Brotherhood of Teamsters, which plunged to No. 46 from No. 25; and the American Federation of State, County, and Municipal Employees (AFSCME), which fell to No. 29 from No. 14 last year. The causes aren't clear. But the Democrats' surprising success in this fall's elections could change all that by next year's survey.

Official Washington is far from monolithic, however, and various factions see the same groups quite differently. Unions, for instance, poll extremely well among Democrats. AFSCME and the UAW would be part of the Power 25 if only Democrats were surveyed--Nos. 10 and 17, respectively. Oddly, the Business Roundtable, that Big Business bastion, also would come close; it was ranked No. 28 by Democrats and only No. 41 by Republicans. (It came in 36th overall.) Likewise, the Securities Industry Association, a significant Wall Street lobby, was rated high by Democrats (No. 19) and low by Republicans (No. 45). So much for the notion that Democrats and Big Business don't mix, or that Republicans and business always do.

An entirely Republican Power 25, on the other hand, would have propelled such GOP stalwarts as Americans for Tax Reform, the National Retail Federation, and the American Legion into the lower end of the Power 25. A purely GOP 25 wouldn't include the Motion Picture Association of America, the National Education Association, or the Health Insurance Association of America. On the other side, a Democratic 25 would push off the list the Chamber of Commerce, the National Restaurant Association, the National Beer Wholesalers Association, and the Veterans of Foreign Wars. So much for bipartisanship. But since Congress is run by Republicans and Democrats, our official ranking is driven by the opinion of insiders of both parties.

Another useful way to dissect our data is to differentiate between the views of people who have power--like members of Congress and their staffs--and the opinions of those who merely seek it, like the lobbying community. As it turns out, clout doesn't look the same from Capitol Hill as it does from K Street. Why? Lawmakers and their aides know who's hot. Fellow lobbyists only think they know. A Hill 25 would excise from the Power 25 the Motion Picture Association of America and the American Council of Life Insurance. It would include the American Legion and the American Hospital Association. (See the table later in the story for more on this power perception gap.)

Any way you slice it, the Power 25 survey has already altered the way Washington works. FORTUNE has learned that after reading last year's rankings, Robert Georgine, president of the AFL-CIO's building-trades department, was determined to improve the standing of the 15 unions under his aegis. To that end, he urged his unions' presidents to endorse a common list of candidates for the 1998 congressional elections as a way to prove their effectiveness. In October they endorsed 207 candidates and agreed to focus their campaign efforts on 11 close contests. Nine of their 11 candidates won. To the horror of some at the AFL-CIO, 12%, or 24 of all the candidates endorsed, were Republicans, which has solidified Georgine's reputation as labor's liaison to Congress' GOP majority.

Of course, not every business that has a problem with Washington can rely on just its interest group for representation. Many of them also hire their own gun--an independent lobbying firm. Last year's poll didn't examine these firms or their derring-do directly. So this time we also put the 50 largest lobbying companies on our questionnaire and asked respondents to evaluate their raw power.

The central conclusion: Hand-to-hand lobbying is all about access, and the firms that have more of it rank higher than those with less. It only makes sense. Who better to worm their way into officialdom than people who have just been there, or who are close to the people who are? The top ten of FORTUNE's list of lobbying firms is peppered with recently departed leaders of Congress and of the political parties.

The No. 1 firm--Verner Liipfert Bernhard McPherson & Hand--acquired marquee names over the past few years in the persons of two ex-Senate Majority Leaders, Bob Dole and George Mitchell, and a former Treasury secretary, Lloyd Bentsen. The No. 2 firm, Barbour Griffith & Rogers, is headed by Haley Barbour, who chaired the Republican National Committee at the moment of the party's greatest glory, 1994, when the GOP won control of the House. Principals in the other top-ranked firms include presidential buddy Vernon Jordan and former Democratic Party Chairman and perennial power broker Robert Strauss of Akin Gump Strauss Hauer & Feld (No. 3), ex-Senate Majority Leader Howard Baker of Baker Donelson Bearman & Caldwell (No. 8), ex-White House Chief of Staff Ken Duberstein of the Duberstein Group (No. 6), and Tom Boggs of Patton Boggs (No. 4), who is the son of an ex-House Majority Leader.

It's too simple to suggest that these or other once-close-tos are nothing more than glad-handers or "access men." A lobbyist nowadays is as much a general as an infantryman. Sure, the ability to get a call returned is vital in the throes of battle. But many former insiders are valued as much for their strategic advice as for their door-opening skills. What else would explain the fact that veteran solons find no lack of job offers "downtown" even though they can't lobby their old colleagues for a year after they leave the Hill? Like Bob Dole, who says he does no lobbying himself, they become "strategists." In effect, they manage entire persuasion campaigns, in some cases lobbying only part-time or as the need arises.

Among the freelance lobbying companies, size doesn't matter. While our top firm, Verner Liipfert, has 185 lobbyists and lawyers, No. 2, Barbour Griffith, has just 13. Two of the top ten--the Duberstein Group and O'Brien Calio--are among the smallest of the 50 we tested. Only four of our most influential ten land among the ten biggest in terms of lobbying revenue.

And then there's the question of campaign money. Among interest groups, the correlation between giving and clout is uneven. Some groups with lots of juice, such as the American Association of Retired Persons (No. 1) and the Christian Coalition (No. 7), don't have political action committees, which are the main vehicle for campaign contributions. Yet some groups that give gobs of loot are nowhere when it comes to power. The International Association of Machinists and Aerospace Workers is No. 73, and the National Automobile Dealers Association is No. 48, yet both sport PACs that brought in more than $3 million this election cycle.

With lobbying companies, there's less doubt about the connection. To be taken seriously, lobbyists must give politicians campaign money and, more important, raise it for them. Nearly a third of the top 30 lobbying firms have their own PACs. In addition, the principals of the firms do their own giving. At one time, Tom Boggs and J.D. Williams of Williams & Jensen (No. 10) were standouts for their fundraising. Now every firm has champions on the money circuit. There is no better way to make sure that doors will open when you knock.

When outsiders peer into the Beltway, they see mostly mega-issues. Abortion. Social Security. Tax reform. But influence peddlers generally steer clear of these battles except when their own crucial interests are at stake (as with, say, Big Tobacco's fight against anti-cigarette legislation this year). Most of the time, they figure, the Big Questions are beyond their control. The wide sweep of public opinion, or the real needs of the populace, will dictate the direction of landmark changes in law. That's why the wiliest Washington lobbyists merely ride the waves of big issues and focus their most intense efforts on the lucrative margins of major legislation or on those in-between bills that escape the voters' notice. A comma here. A phrase there. A midsized law that never gets enacted. That's where big money is made or lost.

The most impressive lobbying winner this year was the little-known organization that represents the nation's 12,000 credit unions. The Credit Union National Association ranked a mediocre No. 70 in the Power 25 last year. Its vault to No. 8 this year was the most pronounced of the entire list. The reason: CUNA persuaded Congress to overturn a Supreme Court decision that would have sharply curtailed credit unions' growth. In the process it trounced its archrival, the American Bankers Association, which for good reason slipped in the rankings to No. 20 from No. 12 last year.

To accomplish this legislative feat, the credit unions' trade association had to awaken a sleeping giant--its members' customer base. For many years credit unions flew below congressional radar. But when the Supreme Court threatened to prohibit them from expanding to cover larger groups of employees, ex-Congressman Dan Mica of Florida was forced to earn his pay as the new president of CUNA. He decided to unleash the 74 million people who bank at credit unions, a number that's more than double the membership of the AARP, the Power 25's No. 1 for two years running.

It took some money (about $7 million a year) and careful preparation (a dozen regional coordinators and lots of members' meetings). But the result was the biggest avalanche of phone calls and letters that many veteran lawmakers could ever recall. When soon-to-be-ex-Senator Alfonse D'Amato of New York wanted a couple of hundred credit union members to storm the Capitol to help him push the credit union's bill through his Banking Committee, Mica sent out a call for help; 6,000 people showed up from all 50 states. "The credit unions showed they can generate a massive level of grassroots support," said Ed Yingling, chief lobbyist for the American Bankers Association. "There was nothing you could do."

At the beginning of 1998, almost everyone believed there was nothing Big Tobacco could do about its problem either: anti-cigarette legislation. Almost everyone was wrong. In Washington, it's easier to stop something than to make it happen. Knowing that, cigarette firms defeated the antismoking bill with lots of money, a little luck, and a great deal of public-opinion survey data. As the Senate's tobacco legislation grew more elaborate and expensive, tobacco executives noticed a pivot in public opinion. Their polling and focus groups suggested that they could push voter support for the tobacco bill below 50% if they hammered home the notion that it was a Big Government boondoggle fueled by a huge tax increase. With the aid of $40 million in advertising, that's what they did.

Once they lowered esteem for the legislation outside the Beltway, they set to work on insiders. They engaged GOP heavyweights like Haley Barbour to reassure congressional leaders that they could kill the bill without endangering the reelection of Republicans. They also were helped when tobacco-state senators feuded over how much transition relief to give farmers, a wrangle that deprived the bill's advocates of a few key votes. But most important, the bill's backers were too smug to realize that they needed to fight back against the cigarette companies and also to trim their overambitious proposal. The result was a decisive win for tobacco.

Another come-from-behind success was staged by the HMO industry. President Clinton was determined to gain vindication for the debacle of his original health-care plan by reining in health maintenance organizations. Like the tobacco bill, the HMO measure seemed a sure bet. But the American Association of Health Plans, the HMOs' newly beefed-up trade group, put together a multi-tiered campaign worthy of a presidential election bid. Under the guidance of Karen Ignagni, a Democrat, and Mark Merritt, a Republican, AAHP turned the inevitable into a squabble for another day.

With $20 million in total funding, the association arranged to have a pro-HMO message greet lawmakers wherever they went. The group held press conferences from Manchester to Miami. It formed a coalition of business groups united by their worry over rising health-care costs. It collected the names of millions of people who love their HMOs and were willing to say so whenever they were contacted by fax or over the Internet. HMO advertising played on TV, on the radio, and in print. And HMO lobbyists pleaded with lawmakers at home and in D.C. In the end, Congress didn't act.

Such cookie-cutter techniques work for either side of an issue, and sometimes so do lobbyists. In 1995, Bonner & Associates helped sugar growers retain their federal price supports even as most other commodities lost theirs. Bonner rounded up hundreds of prominent citizens to tell their congressmen how many American jobs sugar farming creates. Sugar users, especially ice-cream makers, were upset at how effective this method was, but they were also impressed. So this year, when they wanted to prevent milk producers from extending their own form of federal support beyond the small part of the country where it now exists, they hired their old enemy. So far, Bonner and its new employers have won the day.

At the same time, it's facile--and often wrong--to think that big-monied interests can simply buy victory in Washington. In at least one case this year, the side that spent the most lost hugely. The issue was a tax break enjoyed by a handful of real estate firms called paired-share REITs, and some of the most expensive talent in town was retained to save it. This influence armada included Dole and Mitchell of Verner Liipfert, Ken Kies of Price Waterhouse, Janet Boyd of Akin Gump, Katherine Friess of Black Kelly Scruggs & Healey, Rich Belas and Tad Davis of Davis & Harman, John Jonas of Patton Boggs, and Bill Wilkins of Wilmer Cutler & Pickering. The other side, which fought to repeal the provision, was much smaller; it was led by Marriott Corp. and included ex-Senator Robert Packwood (R-Oregon).

All the money in the world, however, couldn't save the tax preference. The main reason: Barry Sternlicht, CEO of Starwood Hotels & Resorts Worldwide, predicted aloud that the subsidy would survive despite the objections of "one small representative," Congressman Mac Collins (R-Georgia). Rule one of lobbying: Never call a member of Congress "small," especially one who sits on the tax-writing House Ways and Means Committee. To rub it in, the anti-tax-break group set up a website that included several other inflammatory comments by Sternlicht. Its address: The benefit, in effect, was revoked.

It's the obscure issues like this that produce the most frenetic lobbying. One provision pushed by the Federal Communications Commission in the final budget bill this year would have stripped NextWave Telecom of New York City, lately in bankruptcy proceedings, of $1 billion of federally auctioned digital wireless telephone licenses. But at the urging of Fred Graefe of Baker & Hostetler, Senate Minority Leader Tom Daschle, Democratic Senator Bob Kerrey of Nebraska, and then-White House Chief of Staff Erskine Bowles intervened at the 11th hour. The provision was crossed out by hand moments before the bill went to the printer. Now, that's lobbying.

REPORTER ASSOCIATES Tyler Maroney, Dustin Smith