Feb. 14 (Bloomberg) -- Former San Diego Mayor Maureen O’Connor took almost $2.1 million from a charity established by her late husband, the founder of Jack in the Box Inc., to finance a gambling addiction that cost her more than $1 billion, U.S. prosecutors said.
O’Connor, 66, pleaded not guilty to a charge of money laundering today in federal court in San Diego in a deal with prosecutors that will let her avoid incarceration and have the charge dismissed if she repays the money and completes psychiatric treatment for her gambling addiction in two years, according to court filings.
The former mayor’s betting streak that played out from 2000 to 2009 in casinos from Las Vegas to Atlantic City, New Jersey, and she won more than $1 billion while also losing so much money that she misappropriated $2,088,000 from the R.P. Foundation to cover her losses, prosecutors said in filings.
As one of three trustees of the charity, O’Connor “was specifically prohibited from receiving a benefit from the foundation,” the government said in a court filing. She “turned to the foundation’s assets to both pay her outstanding debts and continue her high-stakes gambling.”
The R.P. Foundation was created by O’Connor’s former husband, Robert Peterson, who founded the national fast-food chain and, with other people, set up the charity before his death in 1994, according to court records.
O’Connor, a Democrat, was the city’s first female mayor and served two terms from 1986 to 1992.
The U.S. Attorney’s Office in San Diego said the foundation was designated a nonprofit and dispensed funds to such charities as the City of Hope, the Alzheimer’s Association, Little Wishes Foundation, San Diego Hospice and the John Burton Foundation.
O’Connor reported her winnings and losses to the Internal Revenue Service, according to the court filings.
Assistant U.S. Attorney Phillip Halpern said his office agreed to a so-called deferred prosecution in the case because O’Connor is in poor health and probably wouldn’t have been able to face a trial.
“Two years ago surgeons removed a large tumor from her brain and she has suffered a pulmonary embolism and cognitive impairment since,” Halpern said in a telephone interview. O’Connor appeared to have trouble speaking during the court hearing today and walked with the support of a cane, he said.
“This is a very sad case to see someone fall from as high as she was because of a gambling addiction,” he said. “She came from humble origins to become the first female mayor in San Diego and has a long history of charitable works and other deeds that helped improve this city.”
Halpern said the agreement ensures that the charitable fund, which prosecutors said was left bankrupt by the misappropriations, will be paid back the money.
The case is U.S. v. O’Connor, 13-00537, U.S. District Court, Southern District of California (San Diego).