Two nuns trousered up to $500,000 to fund gambling trips to Las Vegas in a crime that may have gone on for a decade.
Sister Mary Margaret Kreuper and Sister Lana Chang stole thousands of dollars from the California school where they worked.
The pair are believed to have taken cheques meant for tuition, fees and donations, and paid them into a bank account separate from the one used by their school in Torrance, California.
A lawyer for St James Catholic School said the two women, who are best friends, had a "pattern of going on trips" and a "pattern of going to casinos", local media reported.
The scam was only discovered after Kreuper, who was principal for 29 years, retired. Chang also retired earlier this year.
Neither has been charged with any crime at this stage.
The school’s pastor, Monsignor Michael Meyers, said in a letter to parents that a "substantial" amount of school funds had been taken for personal use.
The nuns’ order said the amount of funds taken was about $500,000 (£396,000), according to the AFP news agency.
No other school staff were implicated and police had been called, Monsignor Meyers said.
Both intend to pay back the money in full, according to their order, the Congregation of Sisters of Saint Joseph of Carondelet.
Francis Grimes of St James Catholic Church told ABC’s : “They’re taking away the money from kids in school, from kids that need the money. To do that, it’s terrible.”
Marge Graf, a lawyer representing the school, announced at a meeting: “We do know that they had a pattern on trips we do know they had a pattern of going to casinos, and the reality is, they used the account as their personal account.”
“The Sisters of St Joseph of Carondelet have had the privilege of serving the families of St James School and Parish since 1918,” the order said in a statement.
“Our community is concerned and saddened by this situation and regret any injury to our long relationship with the families of the school. The Sisters of St Joseph both desire and intend to make complete restitution to St James School.”
In a letter sent to pupils’ parents earlier this month, the school said it hoped families had not lost trust in the institution.
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