The agency that polices campaign finance activity in California sued Lt. Gov. Cruz Bustamante on Wednesday, accusing him of deliberately evading campaign donation limits and illegally collecting $3.8 million during his failed gubernatorial bid in the recent recall election.

Bustamante faces up to $9 million in penalties in the complaint filed after a months-long probe by the Fair Political Practices Commission.

The agency said Bustamante skirted the state's campaign finance law when he began to build his gubernatorial recall campaign war chest -- including six-and seven-figure contributions from Indian tribes and workers unions -- in an old re-election account that was not subject to finance limits.

In its lawsuit, the commission accuses Bustamante and his campaign committees of "working in concert" to circumvent contribution limits and of improperly reporting donations and spending during the campaign.

"This certainly ranks as one of the most serious violations that we've encountered based upon the large amount of money involved and based upon the intent that was shown by the participants in trying to evade the contribution limits," said Steven Russo, chief of enforcement for the commission.

Bustamante issued a written statement Wednesday stating that he had retained a private law firm to handle the case and his attorneys had not had time to fully review the complaint.

However, he added in the statement, "I want to emphasize that, on the face of it, all the allegations appear to be in regard to actions taken on the advice of my campaign attorneys during my campaign for governor and in consultation with the FPPC."

During the recall campaign, dozens of other candidates who did not spend their own money and did not have pre-existing campaign accounts were bound by Proposition 34's $21,200-per-donor limit. The law allows wealthy candidates, including Gov. Arnold Schwarzenegger, to spend limitless amounts of their own money for their bids.

Bustamante, a Democrat, continued amassing large sums into his 2002 lieutenant governor's re-election committee after he announced he would join the crop of candidates seeking to replace former Democratic Gov. Gray Davis.

His campaign at the time contended the move would allow Bustamante, who is not personally wealthy, to bring in large donations from interest groups with deep pockets to challenge Schwarzenegger, who dipped into his personal fortune to help finance his successful bid.

But Sen. Ross Johnson, R-Irvine, and others complained, prompting the campaign to divert the money into another, separate campaign account. Bustamante used the new account to fund television ads featuring his opposition to Proposition 54, a failed racial privacy initiative on the same ballot as the recall.

In response to a lawsuit filed by Johnson, Sacramento Superior Court Judge Loren McMaster ruled in late September that Bustamante violated the state's new campaign finance law. McMaster ordered Bustamante to halt television ads and return some of the donations.

Still, consumer groups and Johnson clamored for the Fair Political Practices Commission to act in the case before the Oct. 7 election.

The commission conducted a "thorough investigation" that was only recently completed, Russo said.

On Wednesday, Johnson said he was "delighted" by the commission's actions.

"Mr. Bustamante attempted to avoid the law and the plain meaning of the law, but the voters rejected him and that was in part his punishment for these shady schemes," Johnson said. "But we need to send a message to everybody that the law means what it says."

The FPPC usually settles its complaints in an administrative fashion, with a maximum penalty of $5,000 per violation. But in some instances, such as the Bustamante case, the panel files civil lawsuits that can carry far higher penalties. In this case, the commission contends that Bustamante could face up to $9 million in fines.

Complaints about Bustamante's fund-raising practices highlighted the untested parts of the new campaign finance law, as well as sparking criticism of the commission charged with enforcing campaign finance laws in California.

Critics complained that the commission failed to act quickly enough, and failed to deliver concise and consistent interpretations of the new law.

Jim Knox, executive director of California Common Cause, said the panel should have erased a loophole in the law that still is allowing incumbents to collect boundless sums into campaign accounts that existed before the law went into effect.

The law allows candidates to continue to raise money into old accounts for uses such as officeholder expenses, but the FPPC says candidates cannot use an old account to mount a campaign for a new position.

"I'm glad the FPPC is taking aggressive stance on this, however, they are trying to clean up a mess of their own making here," Knox said. "It was the commission that created the loophole that exempts pre-existing committees from the limits voters approved three years ago."