Putting to rest a months-long battle over his fund-raising practices in the fall recall election, Lt. Gov. Cruz Bustamante admitted that he violated state campaign finance laws and agreed to pay a record $263,000 in penalties, according to court documents made public Tuesday.

In a settlement with the Fair Political Practices Commission approved Monday by Sacramento Superior Court Judge Loren McMaster, the Democrat acknowledged illegally raising six-and seven-figure donations to avoid voter-approved contribution limits for his failed gubernatorial campaign.

"After careful review by the attorneys and the court, it was found that my committee did make mistakes and I accept full responsibility for the committee's actions," Bustamante said in a statement released by his political committee.

The six-digit fine - the largest civil penalty ever paid by a state candidate and the third-largest penalty paid to the commission overall - amounted to an appropriate penalty for "a very carefully crafted scheme to try to evade contribution limits," said FPPC Enforcement Division chief Steven Russo.

"We had what was obviously a purposeful effort to evade the intent of the voters in enacting Proposition 34," Russo said. "We certainly hope that this does send a message that the contribution limits in California will be vigorously enforced."

Bustamante admitted 44 violations of the voter-approved proposition, which limits individual contributions for candidates for governor to $21,200. He conceded that he improperly raised $3.8 million into an old account with the intention of using it for his governor's race and then, facing criticism, redirected the money into yet another campaign account to pay for ballot measure ads featuring him.

Bustamante lost the Oct. 7 election to Republican candidate and now Gov. Arnold Schwarzenegger.

Bustamante's chief political adviser, Richie Ross, and attorneys have defended Bustamante's actions, saying he had sought advice from the FPPC and believed his actions were proper.

But in the settlement documents made public Tuesday, Bustamante's attorneys retreated from that statement, saying for the first time that Bustamante had consulted only private attorneys.

The defendants "mistakenly thought that (the FPPC) had expressed that their actions were lawful. However ... no such advice had been provided prior to those actions being undertaken," states the 21-page settlement.

FPPC officials said the admission vindicates the political watchdog agency, which came under fire during the case for providing conflicting and vague advice to candidates.

"Clearly they were not following the advice of the FPPC in what they did here," Russo said.

"Their contention has been that they felt that they had found a loophole that allowed them to avoid the contribution limits, but they were certainly wrong in that, " Russo said.

But Bustamante on Tuesday still contended that the FPPC regulations "weren't as clear as they could have been."

"It was never my intention to violate the law," Bustamante said in the prepared statement. "We believed that we were using a process the FPPC had allowed in the past and that our actions were consistent with the law."

Campaign finance experts cheered the settlement as a significant message to other candidates.

Bob Stern, president of the Center for Governmental Studies in Los Angeles, said it "sends a signal" that candidates can't avoid contribution limits by using old campaign committees or ballot measure committees.

After he launched his candidacy to replace Democratic Gov. Gray Davis in the recall race, Bustamante began to raise large donations - mainly from Indian tribes and workers unions - into his 2002 lieutenant governor re-election committee.

He then transferred the money into his gubernatorial account, in a maneuver that his campaign strategists said would level the field with the wealthy Schwarzenegger, who was unbound in the amount of personal money he could use for his campaign.

Bustamante agreed to stop using the money for his gubernatorial bid after state Sen. Ross Johnson, an Irvine Republican, asked a judge to block him from raising money into the old account.

He instead funneled the contributions into a new account designed to battle a racial privacy initiative called Proposition 54.

The move again stirred complaints because Bustamante personally appeared in anti-Proposition 54 ads - a move critics called a thinly veiled attempt to promote his own candidacy. McMaster ordered him to pull the ads from the air and return any unused contributions to donors.

The Bustamante case also prompted some changes in FPPC regulations. The commission in January said candidates were no longer allowed to raise money into old campaign accounts. This summer, the panel will consider limiting contributions to candidate-controlled ballot measure committees.