SACRAMENTO -- Ending some but not all of the mystery behind an anonymous $11 million donation, an Arizona group revealed under court order Monday that the money it pumped into California's ballot wars was funneled through two groups -- one tied to David and Charles Koch, the billionaire brothers who have played a huge role in spreading anonymous political cash around the country.
The two conservative groups, Americans for Job Security and the Center to Protect Patient Rights, are part of a tangled web of so-called dark donors who operate largely out of public view, shielded by their status as nonprofit advocacy groups that are supposedly not involved primarily in politics.
While the groups have been identified, however, individual donors who have bankrolled them remain a mystery.
But "this isn't going to stop here," said Ann Ravel, chairwoman of the Fair Political Practices Commission, the state's political watchdog. "They admitted to money laundering. We agreed to do this without an audit because we wanted to get information to the public before the election. But we in no way agreed this would preclude further action."
The FPPC determined that the Arizona group, Americans for Responsible Leadership, had violated California campaign law.
Money laundering -- sending money through multiple sources to conceal the original donor -- is a misdemeanor. But a conspiracy to commit money laundering is a felony. It was not clear Monday whether the FPPC or the state Attorney General's Office will pursue criminal charges.
The donation, the largest anonymous contribution to a ballot measure campaign in California history, was made to the Small Business Action Committee, a conservative PAC running a campaign for Proposition 32, the measure that would curb labor's ability to collect political cash, and against Proposition 30, Gov. Jerry Brown's tax-hike initiative.
"This money is so dirty it had to be laundered five times -- and it still stinks," said Brown, who had made it a rallying cry in his campaign to "unmask" the donors.
Election financing experts said if the groups had gotten away without disclosure, it would have set back the national movement for effective disclosure.
"Now California can be seen as a model that others use to fix their own systems," said Rick Hasen, an election law professor at UC Irvine. "This was a test case for (big donors) to see what they could get away with. And it was a successful defensive action against the flow of dark money."
Ravel said Phoenix-based Americans for Responsible Leadership conceded it was the intermediary and not the true source of the contribution. The source was actually Americans for Job Security, which then passed the money through a second intermediary, the Center to Protect Patient Rights, she said.
In its settlement letter, an attorney for the Arizona group said neither it nor the Center to Protect Patient Rights "admit any wrongdoing" and they reserve the right to contest any further action.
Americans for Job Security has been described by the nonpartisan Center for Responsive Politics as "pro-Republican," "pro-business" and "established to directly counter labor's influence." It was founded in 1997 by Michael Dubke and David Carney, the same two GOP strategists who formed Crossroads Media, which runs advertising for American Crossroads, GOP uber-strategist Karl Rove's Super PAC.
In September, Americans for Job Security spent $8 million in ads in the swing states of Florida, Iowa, North Carolina, Ohio, Virginia and Colorado blasting President Barack Obama for what it said was his failure to turn the economy around.
The Center to Protect Patient Rights, also based in Arizona, is run by Sean Noble, an operative of the Koch brothers, who are worth a combined $50 billion, according to Forbes. Noble, a GOP strategist, was hired in 2010 to coordinate the Koch brothers' distribution of millions of dollars to dozens of entities. He has been a member of a group, called the Weaver Terrace Group -- dubbed Rove's "Fight Club" -- that meets regularly to plot campaign financing strategies, said Viveca Nova, a spokeswoman for the Center for Responsive Politics.
Noble admitted in a letter to the FPPC that the Center to Protect Patient Rights received $11 million from Americans for Job Security.
This wasn't a new arena for the Center to Protect Patient Rights. It acted as a pass-through to distribute $44.6 million to other nonprofit groups in 2010, and $10.8 million the year before, according to the Center for Responsive Politics.
"What you get are layers upon layers of groups that don't have to disclose their donors," Nova said. "What California did to reveal these ties is unusual, though it only tells you so much. But it does give more illustration about how the money is being passed around."
California Attorney General Kamala Harris said: "One thing is clear -- further investigation is necessary to determine whether there have been any violations of state law, be they civil or criminal. This thing ain't over. It's not over on Election Day. We are committed to going forward and figuring out what happened."
The revelation came after a 7-0 decision by the state Supreme Court on Sunday ordering attorneys for Americans for Responsible Leadership to immediately hand over documents related to the $11 million donation to the California business PAC.
After turning to the U.S. Supreme Court seeking another delay, attorneys backed down. Rather than hand over all emails and communications between the Arizona group and the California PAC, however, they settled on providing the name of the group that provided the money.
The Arizona group is a 501(c)4 nonprofit advocacy organization, which under IRS rules does not have to reveal donors' names. These groups have become prominent in this election cycle as hundreds of millions of dollars in political cash was unleashed by the U.S. Supreme Court's 2010 Citizens United decision to allow unlimited corporate spending in campaigns.
As corporations and wealthy individuals became more involved, they have sought to keep their names concealed and have found the nonprofit groups an effective conduit to wielding influence without the potential backlash from consumers. They have spent one-fourth of all campaign cash this year, according to ProPublica, an independent investigative group.