A spokesman for the Koch brothers and their company, Robert Tappan, said they had no involvement in the battles over Propositions 30 or 32.
Officials said Russo offered donors two options: provide money directly to a California group called the Small Business Action Committee and have your identities revealed, or give to Americans for Job Security, and remain anonymous because the law does not require that group to identify its donors.
The money sent to Americans for Job Security was intended for "issue advocacy," meaning advertising that doesn't expressly urge Californians to vote one way or another. Because of laws on how and when such funds can be used, the group passed the money to the Center to Protect Patient Rights in Arizona.
The center then sent $11 million to a Phoenix group, Americans for Responsible Leadership, which provided it to the Small Business Action Committee.
In another transaction, using a separate source of money, the Center to Protect Patient Rights provided more than $4 million to the America Future Fund in Iowa, which relayed the money to the California Future Fund for Free Markets, a campaign committee supporting Proposition 32.
The settlement the state reached with the two Arizona nonprofits said violations of California law were inadvertent, and the investigation did not result in any criminal charges.
Kirk Adams, president of Americans for Responsible Leadership, said people who have a problem with anonymous political money "can take it up with the First Amendment."
"What's happened here is an attempt to intimidate groups like ours from participating in California politics," Adams said.
Representatives from the Small Business Action Committee said they plan to fight the $11-million penalty.