Garrett, who ran the Department of Transportation under Gov. Jim Hunt, faces 12 to 18 months in federal prison. His sentence could be altered depending on how much he cooperates with authorities.
As part of Operation Double Black Diamond, federal authorities have raided establishments across the state, rolling out video poker machines.
Garrett now admits his Wilmington business, Cape Fear Music Co., leased video poker machines to businesses that made illegal payouts.
U.S. Attorney Frank Whitney said he hopes the video poker industry will take notice of this high-profile guilty plea.
He warned that the investigation is not over.
"We hope this sends the message that we will follow up [on] those operating illegal video poker machines and those laundering the proceeds of illegal video poker," Whitney said.
As part of the plea agreement, authorities dropped charges that Garrett misused $600,000 in Hurricane Floyd relief money; however, he must pay $750,000 in restitution and more in fines.
Garrett remains free until his sentencing in a few months.
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