O’Connor, 66, appeared in federal court and pleaded not guilty to a money laundering charge as part of a deferred prosecution. Under the arrangement with federal prosecutors, she has two years to repay the $2 million taken from the R.P. Foundation, a nonprofit set up by her late husband, Robert O. Peterson.
Peterson was the co-founder of the Jack-In-The-Box restaurant chain and later Southern California First National Bank Corp., which eventually became part of the Union Bank empire.
Prosecutors said O’Connor, who is in poor physical health, had $1 billion in gambling winnings between 2000 and 2008, but she posted losses during the same period that were greater than that amount. They described her as “destitute.”
San Diego reacts to ex-mayor's day in court
At a press conference with her attorneys after the court hearing, O’Connor said she had borrowed money from her husband’s foundation.
“I always intended to pay it back,” she said.“and I still intend to pay it back. In that period of time I lost my husband, three siblings, best friends.”
O’Connor teared up as she added,“Most of you know, I never meant to hurt the city.” She then left the room, using a cane and holding on to the arm of an escort.
According to a federal court documents, she gambled at casinos in San Diego, Las Vegas and Atlantic City.
O’Connor, a Democrat who served two terms as mayor from 1986 to 1992, is accused of transferring $2 million from the foundation beginning in September 2008 and March 2009. She never repaid the money.
The foundation went broke and closed in 2009, a federal official said.
Under terms of O’Connor’s deferred prosecution, she has to undergo psychiatric treatment for gambling addiction, obey all laws and try to pay back the money.
Her lawyer, Eugene Iredale, said O'Connor was diagnosed with a brain tumor in 2011, and she had surgery that led to brain swelling. He said her doctors have said it's possible the tumor pressed on centers of the brain that affect judgement and reasoning, and could explain in part her gambling addiction.
During the court hearing, O'Connor appeared frail and had to sit down during part of the proceedings.
Her career as a civic leader was impressive. O’Connor rose from a job as a physical education teacher at a Catholic girls school to being elected to the City Council, where she served from 1971 to 1979. She served on the San Diego Unified Port District from 1980 to 1985, before being elected mayor.
She and Peterson were married in 1977. A wealthy philanthropist, Peterson died in 1994.