Mastermind Of Microsoft's Lobbying Quits -- Ellwanger Built Clout In D.C., Olympia

Microsoft's government-relations chief, in charge when the software giant increased its political clout and faced its gravest legal threat from government prosecutors, is calling it quits.

Kimberly Ellwanger, senior director of corporate affairs based in Redmond, is the latest high-profile Microsoft executive to step down. She has told colleagues and friends in government she wants more time with her husband and young daughter, who live in Olympia.

Ellwanger, who is expected to leave next month, was unavailable for comment. Microsoft officials, who will conduct a national search to replace her, expressed regret.

"Kimberly has built an incredibly respected department from practically nothing," said Microsoft spokesman Dan Leach.

For many in Washington and Olympia, Ellwanger has been the public face of Microsoft, one of its first lobbyists who came to oversee its expanding presence in both capitals.

"I've been in a state of depression for the past two hours," said a Capitol Hill staffer about the news. "She goes way back with the company."

Just the same, as the chief political operative at the time Microsoft came under legal fire from the U.S. Department of Justice, some Washington staffers - and some inside Microsoft - blame her team for failing to see the lawsuit coming and stopping it.

In the months before federal prosecutors accused Microsoft of using monopoly power to crush competitors such as Netscape, officials from Netscape were working hard in Washington to prompt an antitrust crackdown. Microsoft, according to its allies, was caught off guard.

The lawsuit not only landed Ellwanger's boss, William Neukom, the company's top lawyer, in federal court for much of the past year, but it could, in the worst-case scenario, result in Microsoft's breakup or restructuring.

Despite Microsoft's allegations to the contrary, Justice Department officials have rebuffed suggestions that lobbying either way had an impact on the decision to pursue the case.

One Microsoft friend, Rep. Jay Inslee, D-Bainbridge Island, said blaming Ellwanger for the antitrust woes is "incredibly naive." But, he added, "Hers has not been an easy job."

In quarters outside the Department of Justice, Microsoft's political savvy and clout have grown in Washington. The company's executives - including Chairman Bill Gates - are hot tickets before Congress, guaranteeing the software giant a voice on any issue it deems important.

With that growing influence, the lobbying staff marked important victories.

The company led a successful industrywide effort to extend to software companies a tax break that many other manufacturers have enjoyed. The value of the tax break for the industry is $1 billion over the next decade.

This year, the White House appears to have come around to the industry's position on the export of encryption software, an issue that has troubled companies for years.

When Microsoft hired Ellwanger in 1991, the company had largely ignored politics. The issue that led to her hiring was a debate in Congress over whether companies could buy software, then rent it out. Congress banned the practice, but the issue woke Microsoft up to the importance of lobbying.

Now in charge of more than 30 staffers, Ellwanger oversaw the hiring of Microsoft's first and only lobbyist in Washington in 1995 and the expansion of the D.C. government-affairs office to 10 lobbyists this year. She strengthened the Redmond staff and hired well-connected former Washington staffers to target state governments nationwide.

In 1998, Microsoft increased spending on lobbying 76 percent to $3.7 million, from $2.1 million a year earlier.

Under Ellwanger, Microsoft's politics have been nonpartisan. While she attended a fund-raiser for Republican presidential candidate Elizabeth Dole in Seattle this summer, she has coordinated Microsoft's political strategy for the campaign.

Microsoft's political bets are spread among several candidates, with Group Vice President Jeff Raikes backing Vice President Al Gore and Chief Operating Officer Bob Herbold supporting Texas Gov. George W. Bush.

But nonpartisan policy has not meant nonparticipatory policy. Campaign contributions are sharply up, tripling last year to $1 million. And despite the nonpartisan stand, Microsoft found more allies within the GOP than among Democrats.

With more than a year to go before congressional and presidential elections, Microsoft and its employees so far this political season have made $331,000 in unregulated political-party donations, about three-quarters of it to Republicans. That's well ahead of the pace of the 1997-98 election season, when Microsoft gave $775,000 to political parties, about 80 percent to the GOP.