LA JOLLA, CA -- Updated at 1:32 p.m. Feb. 14, 2013
Former San Diego Mayor Maureen O’Connor will repay $2 million she took from her late husband's La Jolla-based nonprofit while feeding a gambling addiction in which she won and lost more than $1 billion over eight years, federal prosecutors said Thursday.
U.S. Attorney Laura Duffy said that despite the difficulties presented by this case, “it was imperative to ensure that O’Connor … not be allowed to simply pilfer the R.P. Foundation and avoid paying her appropriate tax obligations.”
O’Connor’s late husband, Robert O. Peterson, was co-founder of the Jack-In-The-Box chain and later Southern California First National Bank Corp., which became part of the Union Bank empire, noted U-T San Diego.
“O’Connor was a selfless public official who contributed much to the well-being of San Diego,” Duffy said of the last Democrat to serve as mayor before Bob Filner took office in December. “However, no figure, regardless of how much good they’ve done or how much they’ve given to charity, can escape criminal liability with impunity.”
The R.P. Foundation supported such charities as City of Hope, the Alzheimer’s Association, Sharp Healthcare, Little Wishes Foundation, San Diego Hospice and the John Burton Foundation.
“As revealed in court documents, between 2000 and 2009, O’Connor won more than $1 billion while gambling in various casinos in Las Vegas, Atlantic City and San Diego,” said Duffy’s office.
“Despite these immense winnings, she suffered even larger gambling losses—resulting in a sizable net loss. Indeed, by early 2008, she incurred large, outstanding gambling debts at a number of different casinos.”
To continue her gambling spree, said a statement, O’Connor, 66, 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, said the office. Mitt Romney bought the house once used as an O’Connor vacation rental, according to The New York Times.
“By September 2008, O’Connor had few, if any, assets that had not been mortgaged, sold off or otherwise liquidated,” the office said.
At that point, she began tapping foundation assets to pay gambling debts and continue what the government called “high-stakes gambling.”
“Between September 2008 and March 2009, O’Connor misappropriated more than $2,088,000 from the foundation,” the office said.
Prosecutors said the foundation was forced to close its bank accounts in April 2009.
“Although O’Connor characterized the misappropriated funds as ‘loans’ from the Foundation (and may have initially intended to repay the funds) her actions were nevertheless specifically prohibited—and constituted impermissible self-dealing in violation of her fiduciary responsibility to the foundation,” the office said.
According to court records, surgeons in 2011 operated on O’Connor to remove a large tumor from her brain, the office said. But she later suffered complications including a pulmonary embolism and cognitive impairment.
The tumor was in an area of the brain that involves “logic, reasoning and judgment,” said O’Connor’s attorney, Eugene Iredale.
“While found competent to enter into this deferred prosecution agreement by Magistrate Judge David Bartick, all parties agree that her medical ailments render it highly improbable—if not impossible—that she could be brought to trial,” the office said.
If O’Connor satisfies all conditions of her deferred prosecution (including restitution), the government has agreed to dismiss the case against her in two years.
Peterson died in 1994. O’Connor said three of her 12 siblings and two best friends have also died.
O’Connor said she began to gamble heavily in 2001.
“I did borrow the money,” a tearful O’Connor said outside court after her court appearance in downtown San Diego. “I always intended to pay it back. I still intend to pay it back. I never meant to hurt the city.”
Iredale said the former mayor lost more than $13 million playing video poker at casinos over the past decade.
“She played video poker on machines that were programmed to pay out 80 percent of the money that was put in, so that the more you play the more you
lose,” Iredale said.
Attorney Maria Severson said O’Connor has a more than $7 million lawsuit pending in Superior Court against three people and a German bank over the sale of a Mendocino County hotel in 2005.
If the lawsuit is successful, more than $2 million will be paid toward restitution, she said.
O’Connor was elected to the San Diego City Council at age 25 in 1971. In 1986, she was elected mayor to serve out the term of then-Mayor Roger Hedgecock.
She was re-elected to serve out a full four-year term from 1988 to 1992.
N. Dawn Mertz, acting special agent in charge for IRS criminal investigation in Los Angeles, added:
“Today, Maureen O'Connor acknowledged that she embezzled over $2 million from the R.P. Foundation, a charitable nonprofit organization. This embezzlement contributed to the demise of this organization. … O'Connor’s guilty plea emphasizes that those who violate our nation’s tax laws, regardless of their status, face investigation by IRS Criminal Investigation, prosecution for their crimes and remain liable for their tax liability.”
—City News Service contributed to this report.