The gambling losses reached more than $1 billion. The former mayor of a major U.S. city appears to blame the spree on a brain tumour.
Maureen O'Connor acknowledged in federal court on Thursday that she took $2.1 million from her late husband's charitable foundation during the decade-long gambling binge.
O'Connor, former mayor of San Diego, pleaded not guilty to a money laundering charge in an agreement with the Justice Department that defers prosecution for two years while she tries to repay the foundation and receives treatment for gambling.
"There are two Maureens, Maureen No. 1 and Maureen No. 2," O'Connor told a news conference. "Maureen No. 2 is the Maureen who did not know she had a tumour growing in her brain." The tumour was diagnosed in 2011.
O'Connor, 66, once had a personal fortune that her attorney estimated between $40 million and $50 million, inherited from her husband, Robert O. Peterson, founder of the Jack in the Box Inc. fast-food chain. She is now virtually broke, living with a sister.
O'Connor began gambling around 2001 as she struggled with pain and loneliness from the death of her husband from leukemia in 1994 and the passing of several close friends, said her attorney, Eugene Iredale.
He called it "grief gambling" in a court filing.
O'Connor won about $1 billion from 2000 to 2009, according to winnings that casinos reported to the Internal Revenue Service, but lost even more.
The U.S. attorney's office said O'Connor's medical condition influenced the decision to strike a deal, saying it may have been impossible to bring the case to trial. The tumour was removed, but doctors submitted letters detailing significant ailments.
"Maureen O'Connor was a selfless public official who contributed much to the well-being of San Diego," said U.S. Attorney Laura Duffy. "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."