Lee Hoi-chang also told journalists on Monday he was ready to go to jail for the $42 million in illegal donations.
The admission by Lee Hoi-chang came a day after President Roh offered to resign if his own campaign was found to have taken more than a fraction of the corrupt cash drawn by the opposition.
However, Roh now appears to be backing away from that offer.
Bad election blood
Lee's confession capped weeks of bitter recriminations over illicit spending in the December 2002 election.
"I confess this was done under my charge and I'm entirely responsible for this," Lee told a news conference, referring to the funds.
A former supreme court justice, he retired from politics after his unexpected loss to Roh.
An investigation of funding violations has thrown South Korean politics into disarray, as rival parties compete to highlight each other's misdeeds in advance of parliamentary elections next April.
The Korean president told political party leaders on Sunday he would quit if his camp was found to have taken more than one-tenth of the illegal funds used by Lee's party.
All 18 members of cabinet offered
their resignations in October
But on Monday he regretted that his words had been taken literally when he meant to stop opponents from spreading unproven allegations about off-the-book funds in his 2002 campaign.
When the funding troubles emerged in October with revelations that a close Roh aide had taken 1.1 billion won ($928,000) from a scandal-tainted firm, the president vowed to hold a referendum and step down if he lost a confidence vote.
Roh, who has served less than one year of his five-year term, then acknowledged on Sunday that the referendum was "not possible".
However, he has offered to subject himself to scrutiny by a special counsel if suspicions remain after an investigation.
South Korea's legal limits for last year's election were 34.1 billion won ($28.8 million) for each candidate, with parties barred from receiving more than 250 million won ($211,000) from any single campaign donor.
The illegal political war chests in 2002 pale in comparison with those of past governments.
In 1995, former presidents Chun Doo-hwan and Roh Tae-woo were arrested on corruption charges after amassing slush funds of $1.8 billion and $500 million, respectively.
Roh campaigned in 2002, vowing to put an end to shady dealings among the nation's business and political elites.