For nearly five years, Minnesota taxpayers covered Pamela Marie Dellis' gambling debts, sent her sister to the casino and helped her niece pay some bills. Of course, taxpayers didn't know about it and it was all illegal.

On Monday in federal district court in Minneapolis, Dellis, her sister Nancy T. Sondrall and her niece, Laurie R. Sondrall, came clean. They admitted to a scheme that defrauded the state Department of Revenue -- and taxpayers -- out of nearly $2 million.

Dellis, a former auditor with the revenue department whose job involved issuing refund checks and direct deposits to worthy taxpayers, diverted money to her sister and niece that the three then divided up for their own uses. The scheme lasted from January 2005 to Sept. 17, 2010.

Her motive: "I do have a gambling addiction," Dellis told U.S. District Judge Joan Ericksen.

Dellis, 58, of Lindstrom, Minn., pleaded guilty to conspiracy to commit mail fraud and money laundering. Nancy Sondrall, 55, of Brooklyn Center, and Laurie Sondrall, 28, of Minneapolis, each pleaded guilty to conspiracy to commit mail fraud.

Dellis' job as an auditor was, in part, to process legitimate tax overpayments. She had been with the Minnesota Department of Revenue since September 1981.

Somewhere along the line, she ran into trouble gambling. Prosecutors say she created more than 200 false refunds -- in the form of checks and electronic funds transfers -- worth more than $1.9 million that she then had sent to her sister and niece. They, in turn, would take the money out as cash or cashiers' checks before splitting the proceeds with Dellis.

When Dellis' sister was asked about her part in the scheme, Nancy Sondrall said that, at the beginning, "it was to help Pam because she was in trouble." Later, though, Sondrall said she did it for the money -- and that she gambled as well.

"Nobody forced me," Nancy Sondrall told the judge.

The women quickly left the courtroom after Monday's hearing and did not comment about their case.

At the time Dellis was charged, Gov. Mark Dayton requested that the legislative auditor conduct a detailed examination of the revenue department's internal controls "to ensure that this kind of criminal fraud against the state of Minnesota cannot be committed again."

Ericksen will sentence the three later. Under federal sentencing guidelines, Dellis faces up to 71 months in federal prison; Nancy and Laurie Sondrall face up to 30 months in prison.

James Walsh • 612-673-7428