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Former San Diego mayor Maureen O'Connor heading to federal court in San Diego on Thursday. / Peggy Peattie U-T San Diego/AP

Using $2 million siphoned from her late husband's charity, former San Diego mayor Maureen O'Connor won more than $1 billion but lost even more during a nine-year gambling spree that now finds her charged with money laundering, the U.S. attorney announced Thursday.

O'Connor, a two-term Democrat who served between 1986 and 1992, pleaded not guilty but admitted misappropriating the money as part of a deferred prosecution. She has two years to repay the $2,088,000 she took from the now-bankrupt R.P. Foundation, a non-profit created by her late husband, Robert O. Peterson, a co-founder of the Jack-In-The-Box restaurant chain and a Southern California bank that was acquired by Union Bank. He died in 1994.

As part of the agreement, O'Connor must also pay state and federal income taxes on the more than $1 billion she won gambling between 2000 and 2009 and undergo treatment for her "addiction," according to a news release from U.S. Attorney Laura E. Duffy, who heads the Southern District of California. During that time, however, she lost more than $1 billion gambling in San Diego, Las Vegas and Atlantic City.

O'Connor, 66, was described as "destitute." She is also in poor health; in 2011, doctors removed a large tumor from her brain.

By early 2008, the government said, O'Connor had "incurred large, outstanding gambling debts at a number of different casinos."

In order to stay afloat financially and continue her gambling spree, O'Connor liquidated her savings, sold numerous real estate holdings and auctioned valuable personal items. She also obtained second and third mortgages on her personal residence in La Jolla, California.

By September 2008, O'Connor had few, if any, assets that had not been mortgaged, sold off, or otherwise liquidated. At that point, she turned to the Foundation's assets to both pay her outstanding debts and continue her high-stakes gambling.

O'Connor and her twin sister are two of the foundation's three trustees, the San Diego Reader reported. The foundation gave money to charities that included the City of Hope, the Alzheimer's Association, Sharp Healthcare, Little Wishes Foundation, San Diego Hospice and the John Burton Foundation.

Between September 2008 and March 2009, prosecutors said, O'Connor drained the foundation of its assets. She admitted taking the money but maintains that the transfers were "loans" she intended to repay.

"I always intended to pay it back, and I still intend to pay it back," she said at a press conference with her attorneys after the federal court hearing, U-T San Diego reported. "In that period of time I lost my husband, three siblings, best friends."

"Most of you know, I never meant to hurt the city," she added, tearing up, before leaving the room with the help of her cane and an escort.

As a result of the brain tumor, O'Connor suffered "significant complications, including a pulmonary embolism and cognitive impairment," prosecutors said, describing her health problems as "continuing and serious.

Prosecutors said that although she was found competent to enter into the deferred-prosecution agreement, "all parties agree that her medical ailments render it highly improbable - if not impossible - that she could be brought to trial."

If she fails to repay the money and meet conditions of the plea arrangement, the money-laundering charge would stand. If convicted, she could face a maximum 10 years in prison.



Copyright 2014 USATODAY.com

Read the original story: Ex-San Diego mayor drained charity, lost $1B gambling

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