Ex-San Diego Mayor Misused Charity Funds for Gambling

Former San Diego Mayor Maureen O’Connor was spared prison in a plea deal after taking almost $2.1 million from a charity started by her late husband, Jack in the Box Inc.’s founder, to finance a gambling spree in which she made and then lost more than $1 billion.

The former mayor’s betting streak lasted from 2000 to 2009 in casinos from Las Vegas to Atlantic City, New Jersey, and she misappropriated the funds from the R.P. Foundation to cover her losses, prosecutors said in court filings.

O’Connor, 66, pleaded not guilty yesterday to a charge of money laundering in federal court in San Diego. An agreement with prosecutors will let her avoid incarceration and have the charge dismissed if she repays the charity’s money and completes psychiatric treatment for her gambling addiction in two years, according to court 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 deceased 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.

Democratic Mayor

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 yesterday and walked with the support of a cane, he said.

‘Very Sad’

“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.

By early 2008, O’Connor was so in debt to casinos that she 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 the tony beachside community of La Jolla, California, according to the court filings.

Even after taking more than $2,088,000 from the R.P. Foundation from September 2008 to March 2009, O’Connor continued her high-stakes gambling and won $100,000 in April 2009 at the Barona Resort & Casino in Lakeside, California, near San Diego, prosecutors said. That same month, the foundation’s bank accounts were closed, according to the filing.

The agreement with prosecutors allows O’Connor to remain free without posting bail or a bond.

The case is U.S. v. O’Connor, 13-00537, U.S. District Court, Southern District of California (San Diego).

To contact the reporter on this story: Bill Callahan in federal court in San Diego at Callahan@san.rr.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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