Deborah Jones became emotional as she revealed she was "scared" when Sandwell Council interviewed her about the alleged racket at Smethwick's Annie Lennard Primary.
The 57-year-old admitted she lied at times during the 10 interviews but claimed headteacher Michelle Hollingsworth "knew everything" and "nothing happened at the school" without her authorisation.
Jones told Wolverhampton Crown Court: "In my interview, I was very scared and panicked, and the way things were said were not always clear.
"At that time, I said things I did not want to. There were different things going on in my life.
"But I stand by what I said, Michelle was involved in everything that went on at Annie Lennard, not only with me but other people."
Jones and Hollingsworth allegedly spent up to £16,000-a-time of the school's cash on a string of boutique shopping trips buying handbags, shoes and furniture.
School cheques with purchase orders were used but the pair claimed the goods were educational, the court was told.
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Jones told jurors she felt "stupid" for allegedly taking £30,000 offered by Hollingsworth to "keep quiet", claiming she was being "controlled" by the headteacher.
Continuing with her evidence on Tuesday, Jones said: "Effectively, he was paying me keep quiet about the whole thing.
"I was extremely scared at this time, and rightly or wrongly, looking back now, I trusted Michelle and I believed what she said."
Prosecutor Mr Mark Jackson put it to Jones that her young granddaughter benefited from the alleged scam by receiving clothes bought with school funds.
But Jones, of Barrs Road, Cradley Heath, denied she had received "designer clothing" allegedly bought with the funds.
Jones admits conspiring with the head teacher to defraud Sandwell Council and the school but denies further conspiracies alleged to have taken place with other people during the five year fraud.
Hollingsworth, of Hatherton Park, Cannock, denies conspiring with Jones and all other charges brought against her.
The case continues.