Sister Marie Thornton, former vice president of finance at Iona College in New Rochelle, New York, is charged with sending phony invoices to the school to pay off personal credit card bills and expenses, the Attorneys office said.
The thefts occurred between 1999 and 2009, when Thornton resigned, court documents said. She entered a plea of not guilty to a federal embezzlement charge.
The college of some 5,000 students has come under fire from alumni and donors for never reporting the missing money to authorities and only mentioning the theft in its 2009 tax filing sent in February to the Internal Revenue Service.
Iona officials issued a statement saying the school has taken action, implemented new financial oversight controls and recovered most of the missing funds.
The school also disputed the amount stolen but did not specify by how much. In the IRS filing, Iona said the theft amounted to $800,000.
Since word of the theft spread in the wake of the tax filing, more than a dozen current and former Iona employees have come forward to accuse Thornton of taking money.
The nun had a reputation for visiting casinos in Atlantic City, New Jersey, according to a former Iona basketball coach.
The former coach, Jeff Ruland, was appearing on a local sports radio show to discuss dismissal from his job and mentioned Thornton in passing.
I think she absconded with some funds or something down to Atlantic City, but thats neither here nor there, he said.
Neither Thornton nor her attorney could be reached for comment.