The couple have pleaded not guilty to charges related to allegedly paying William "Rick" Singer $500,000 to get their daughters, YouTube star Olivia Jade and aspiring actress Isabella, into the University of Southern California (USC). The girls reportedly posed as crew team recruits despite not being coxswains.
Insiders told Entertainment Tonight that Loughlin felt deceived by Singer, scam mastermind-turned-cooperating witness, about the severity of what she and Giannulli were doing.
"[Lori and her husband] claim they were under the impression they might be breaking rules, but not laws.They feel they were manipulated by those involved and are planning that as part of their defense," a source told the outlet. "They realize how serious the charges are, but feel that once the judge hears their story he will see they had no bad intentions."
After the couple rejected a plea agreement that "Desperate Housewives" star Felicity Huffman and several others implicated in the scheme accepted, prosecutors slapped Loughlin and Giannulli with additional charges of money laundering and conspiracy to commit fraud. If convicted of all charges against them, Giannulli and Loughlin may face up to 40 years behind bars.
"When Lori heard the number of years she could spend in prison she broke down crying. The thought of being separated from her loved ones for years brought her to her knees. She has watched as the other families cut deals but her husband feels they are not guilty and should plead not guilty," the source said.
The source denies the former "When Calls the Heart" star and the fashion designer are truly guilty of the charges based on their own ignorance, but admits that a judge and jury may not see it that way.
"They in no way felt they were money laundering," the source claimed. "They thought the money would be used for a donation and to benefit the school. Even so, this has been one of the toughest decisions of Lori‘s life."
The insider added, "[Their friends] have explained to them that they cannot just plead ignorance. In the end, she trusts those who are advising her and somehow believes there is a chance she will go free." Another source said Loughlin initially assumed she'd just get "a slap on the wrist."
Loughlin's attorneys and rep did not immediately respond to Fox News' requests for comment.