By Marty Graham
SAN DIEGO (Reuters) - A former San Diego mayor accused of raiding her late husband's charity to cover high-stakes casino debts agreed with federal prosecutors on Thursday to pay more than $2 million in restitution and undergo treatment for her gambling addiction.
Maureen O'Connor, who was mayor between 1988 and 1992, had been married to Robert O. Peterson, the founder of the Jack in the Box fast-food restaurant chain, and it was from his charitable foundation that she pilfered money to cover her gambling losses.
Peterson died in 1994, leaving his wife as one of three R.P. Foundation trustees who were specifically barred from receiving any personal financial benefit from the charity.
Court documents in the case show that O'Connor ran into financial trouble after she amassed winnings of more than $1 billion between 2000 and 2009 while gambling in various casinos in Las Vegas, San Diego, and Atlantic City, New Jersey.
But she went on to suffer even larger gambling losses, resulting in sizable debts.
In order to stay afloat financially while continuing to gamble, she liquidated her savings, sold off numerous real estate holdings and valuable personal belongings and even took out second and third mortgages on her home.
Left with few if any assets by the fall of 2008, according to court records, O'Connor turned to her husband's foundation and pilfered more than $2 million from the charity as illegal personal "loans" to cover her debts, ultimately forcing the foundation to close its bank accounts in April 2009.
The rare deferred-prosecution agreement settles criminal charges against O'Connor, 66, who underwent surgery in 2011 for removal of a brain tumor and suffered additional medical complications that make it unlikely she could be brought to trial, prosecutors said.
If O'Connor satisfies all the conditions of her deferred prosecution, the government has agreed to dismiss the charges against her in two years' time, the U.S. Attorney's Office in San Diego said in a statement.
(Reporting by Marty Graham; Writing Steve Gorman; Editing by Cynthia Johnston, Gary Hill and Bernard Orr)