                             In the
 United States Court of Appeals
               For the Seventh Circuit
                         ____________

Nos. 05-1548 & 05-1549
UNITED STATES OF AMERICA,
                                               Plaintiff-Appellee,
                                v.

JOE DE LA CRUZ and EDWARDO MALDONADO,
                                    Defendants-Appellants.
                         ____________
           Appeals from the United States District Court
     for the Northern District of Indiana, South Bend Division.
         No. 03 CR 91—Robert L. Miller, Jr., Chief Judge.
                         ____________
   ARGUED MAY 31, 2006—DECIDED NOVEMBER 29, 2006
                    ____________


 Before KANNE, EVANS, and SYKES, Circuit Judges.
  KANNE, Circuit Judge. Defendants Joe De La Cruz and
Edwardo Maldonado were each convicted on a single
count of misapplying public funds in violation of 18 U.S.C.
§ 666(a)(1)(A). On appeal, the defendants argue that they
could not have misapplied funds in violation of
§ 666(a)(1)(A) because the expenditures in question were
properly approved by the city government. Defendants
also argue that an evidentiary ruling constitutes re-
versible error and that their sentences are the result of
clear error. We disagree and affirm the convictions and
sentences.
2                                  Nos. 05-1548 & 05-1549

                      I. HISTORY
  De La Cruz and Maldonado were both public officials
in the city of East Chicago, Indiana. De La Cruz was a
member of the City Council. Maldonado was the City
Controller, which made him the chief fiscal officer for the
City. His signature appeared on all checks paid with City
money. Maldonado was also a member of the Board of
Works, which was responsible for approving all public
works projects.
  In 1998, the Board of Works began soliciting bids for
specific work to be done on the City’s sidewalks. Under
Indiana law, any project estimated to cost more than
$75,000 must be publicly bid. A flat bid of $454,155 was
received for the project from a company called Reith-Riley
in June. Given the amount of work solicited, that bid came
out to $5.08 per foot. No action was taken on this bid.
Instead, the City Engineer at that time ordered the work to
be done on a piecemeal basis, in amounts lower than
$75,000.


    A. The 1999 Sidewalk Program
  In February of 1999, Maldonado attended a meeting of
the Board of Works along with a new City Engineer, Pedro
Porras.1 Prior to that meeting, Maldonado asked Porras
to ask the Board to advertise bids for work on public
sidewalks. Porras obliged, even though he had no such
plans before the meeting. The Board approved, and even
hired an engineering consultant to oversee the prospec-
tive sidewalk plan. But the plan never got off the ground,
and in March of 1999 it was postponed indefinitely.



1
  Porras was indicted along with De La Cruz and Maldonado,
but pled guilty prior to trial.
Nos. 05-1548 & 05-1549                                       3

  Despite the absence of an approved plan, sidewalks were
being poured in East Chicago. Several contractors were
at work, despite the fact that many of them had never
worked on sidewalks before. The contractors were operating
without the formal approval of the Board of Works and
without complying with the procedural requirements
necessary to begin a city project. The orders to pour con-
crete came from a number of sources, including De La Cruz
and Frank Kollintzas, president of the City Council.2
  The work was not limited to sidewalks. Contractors also
poured new driveways, patios, basketball courts, boat pads,
and swimming pools—all on private property. A number of
private businesses had their parking lots redone. Other
residents had their trees trimmed for free.
  All of this work was done against the backdrop of a
primary election scheduled for May 4, 1999. Kollintzas,
De La Cruz, and the Mayor of East Chicago all faced
primary battles. Kollintzas would knock on doors in his
district, introduce himself as a councilman and then offer
free concrete. Residents openly supporting Kollintzas, the
Mayor, and their political allies were provided free services,
while those supporting the political opposition were refused.
Millions of dollars worth of work was performed in a ten-
week period between March and May of 1999. In the days
leading up to the election, contractors were working 10 to
15 hours a day, 6 to 7 days a week.
   Despite the fact that he was City Engineer, Porras was
first informed about the concrete work through citizen
complaints and from Kollintzas. Kollintzas directed Porras
to provide concrete work to specific contractors. Porras
did so only after conferring with Maldonado and being


2
  Kollintzas went to trial along with De La Cruz and Maldonado,
but fled the country after his conviction. He was sentenced in
absentia to 136 months’ imprisonment.
4                                  Nos. 05-1548 & 05-1549

assured by Maldonado that the City would handle all the
bills. From March to May of 1999, Maldonado’s office issued
millions of dollars worth of checks to pay for the work,
including work done on private property.
  De La Cruz frequently authorized and supervised con-
crete work. He, in fact, had work done at his home, includ-
ing a driveway, steps, and a walkway. One East Chicago
resident, who had campaign signs up for the political
opposition, witnessed work in her neighbor’s yard and
asked De La Cruz if she too would receive new concrete. De
La Cruz told her she had the wrong sign up.
  After the election, the City was faced with the daunt-
ing prospect of paying all the contractors and finishing
up the work. On the day of the election, the City’s bank
account was overdrawn by approximately three million
dollars. By the middle of May, that amount increased
another two million dollars, at which point the bank began
dishonoring all City checks, including payroll. In the end,
the City spent close to 24 million dollars in the weeks
leading up to the election pouring concrete and trimming
trees.


    B. Ratification
  The City attempted to clean up the mess by hiring an
engineering consultant and a lawyer. The consultant
performed an audit to determine what work had been done,
what remained, and who needed to be paid. The lawyer
advised the City to do what it heretofore had not—approve
of the work through proper legal channels. Ordinances were
passed raising millions of dollars necessary to keep the city
operating. These ordinances purported to have the City
Council appropriate money for the already completed work.
The Board of Works then met in June of 1999 to accept the
bid Reith-Riley had made nearly a year earlier. The Board
accepted the bid in its $5.08 per foot form as the unit price
Nos. 05-1548 & 05-1549                                      5

to be paid for all outstanding claims. The City then began
to settle outstanding claims with each of the contractors,
requiring them to sign backdated work agreements. These
agreements included paying for work done on private
property. Maldonado was involved in these negotiations,
and he signed the backdated agreements on behalf of the
Board of Works.


  C. The State Audit
  The City’s problems were far from over. Each year, the
State of Indiana audits the financial statements of munici-
palities, including those of East Chicago. The State’s 2000
audit report for East Chicago determined that the Board of
Works violated state law by approving “nonpublic concrete
work.” The auditors also requested, in accordance with state
law, that each member of the Board of Works reimburse the
City for all money spent in violation of law.
   The City responded with its own legal opinion, which was
required to be included in the State’s official audit report.
The opinion, in short, argued that the City was in the
somewhat unique position of being in control of a private
nonpublic trust fund that could be used for
private purposes. The source of this trust fund was a local
casino. That casino generated five revenue streams for the
City. Two of those revenue streams were required and
authorized by statute. Two other revenue streams benefited
nonprofit corporations outside of the City’s control. A final,
fifth fund, apparently unique to the City of East Chicago,
was created as a result of an agreement between the casino
and East Chicago’s Mayor. This revenue stream ran
through an expendable trust and then into a sub-fund,
Fund 246, of the City’s general fund. According to the City’s
legal opinion, Fund 246 “could be used for any purpose
authorized [by the trust], including paying for nonpublic
concrete work that improved property values within the
6                                     Nos. 05-1548 & 05-1549

City.” The state auditors, apparently unconvinced, did not
change their report.


    D. Trial and Sentencing
  At trial, the defendants attempted to admit into evi-
dence the State’s audit report and the City’s accompany-
ing legal opinion. The government objected, arguing that
the City’s response to the audit report was impermissible
hearsay. While Chief Judge Miller agreed with the defen-
dants that under Indiana law, the audit report and the
City’s response were a single document, he still thought
it proper to treat the two separately while addressing
the hearsay objection. Judge Miller was willing to allow
admission of the audit report as a public record under
Federal Rule of Evidence 803(8), but ruled that the City’s
response was impermissible hearsay.
  The defendants were tried on a number of charges, but
were only convicted on one count each of misapplication of
public funds. They were acquitted on all other counts. These
convictions occurred between the Supreme Court’s decisions
in Blakely v. Washington, 542 U.S. 296 (2004), and United
States v. Booker, 543 U.S. 220 (2005). Attempting to deal
with the uncertainty created by Blakely, Judge Miller
submitted the question of loss amount to the jury, which
came up with amounts of between $800,000 and $1,500,000
for Maldonado, and between $120,000 and $200,000 for De
La Cruz.
  The defendants were not sentenced, however, until after
Booker, at which point Judge Miller decided he was not
bound by the jury’s loss amount finding.3 Judge Miller made
his own finding, applicable to both defendants, of 23.97


3
  The defendants have not appealed Judge Miller’s ruling that the
jury’s loss determination was not binding.
Nos. 05-1548 & 05-1549                                      7

million dollars. He agreed with the defendants that the loss
amount should be offset by any value given to the City, but
nevertheless determined that the City of East Chicago had
received no benefit whatsoever by having its funds misap-
plied to pay for the work performed in the Spring of 1999.
The loss amount, along with other enhancements, resulted
in prison sentences for Maldonado and De La Cruz of 97
and 72 months, respectively.


                      II. ANALYSIS
  The defendants’ main argument on appeal is that the
City’s “ratification” of the work makes it legally impossible
for them to be guilty of misapplication of public funds.
Defendants also take aim at Judge Miller’s decision to allow
the State’s 2000 audit report but not the City’s accompany-
ing legal opinion. Finally, the defendants attack their
sentences, arguing that the ratification makes the loss
amount zero, and, alternatively, that they deserve some
credit for the benefit they believe the City received from the
concrete and other work performed in March and May of
1999.
  The purported ratification consists of the actions the City
Council and Board of Works took at the behest of their
lawyer, including the after-the-fact authorization of the
work and the acceptance of the nearly year old Reith-Riley
bid. In support, the defendants delve deeply into Indiana
law, explaining in detail how state law allows a city to
“ratify any action of the unit . . . if that action could have
been approved in advance.” IND. CODE ANN. § 36-1-4-16
(West 2006).
  We have serious doubts that the defendants’ attempt
at ratification can meet the state law’s requirement that
“[r]atification of an action . . . must be made by the same
procedure that would have been required for approval of the
8                                    Nos. 05-1548 & 05-1549

action in advance.” Id. But we need not decide any ques-
tions of Indiana municipality law. For our purposes, we can
assume the Board of Works and the City Council properly
ratified, after the fact, all of the concrete work in question.
We nevertheless reject the defendants’ premise that a
municipality’s ratification, or authorization, of an expendi-
ture is a complete defense to a federal criminal prosecution
for misapplication of public funds under 18 U.S.C.
§ 666(a)(1)(A).
   The defendants candidly admit they can find no crim-
inal case applying their theory of defense. Our precedent
has considered it under similar circumstances and rejected
it. In United States v. Bailey, 859 F.2d 1265 (7th Cir. 1988),
the defendant was convicted of willfully misapplying the
funds of a savings and loan in violation of 18 U.S.C. § 656.
On appeal, the defendant argued that the district court
erred by refusing to instruct the jury that the board’s
consent to the expenditures in question was a complete
defense to the misapplication charges. Id. at 1279. We
affirmed, explaining that the Supreme Court has made
clear that so long as the proper intent exists, a bank board’s
authorization does not bar criminal prosecution for misap-
plication. Id. (citing Evans v. United States, 153 U.S. 584,
593 (1893)). We think Bailey’s reasoning applies equally to
prosecutions under § 666.
  Authorization, or ratification, from those with authority
can be an important evidentiary factor in favor of the
defense, militating against a finding of intentional misap-
plication. Id. (citations omitted); see also United States v.
Castro, 887 F.2d 988, 995 (9th Cir. 1989) (quoting United
States v. Unuruh, 855 F.2d 1363, 1368 (9th Cir. 1987)
(“Evidence of a bank’s consent is . . . treated as ‘evidentiary
matters [sic] that may be considered as part of the defense
that there was either no willful misapplication or no intent
to injure the bank.’ ”)). But after-the-fact ratification does
not function as a complete defense to prosecution when
Nos. 05-1548 & 05-1549                                       9

criminal intent is proven, and this case is a good illustration
of why. Many of those purportedly ratifying the work were
later indicted. These officials attempted to immunize
themselves from federal prosecution by simply stamping
their criminal misapplication of funds as approved.
Whether the defendants were acting with the intent to
misapply funds, or for proper purposes, is a question for the
jury. The jury found that the defendants had criminal
intent to misapply funds. On review, “viewing the evidence
in the light most favorable to the prosecution,” we find that
a “rational trier of fact could have found the essential
elements of the crime beyond a reasonable doubt.” United
States v. Haddad, 462 F.3d 783, 791 (7th Cir. 2006) (quot-
ing Jackson v. Virginia, 443 U.S. 307, 319 (1979)). There
was substantial evidence presented to the jury that the
defendants intended to provide the sidewalk and other
benefits solely for their own personal and political advan-
tage. There may be a case where the consent or authoriza-
tion of those with authority, combined with a dearth of
evidence supporting a criminal intent, results in insufficient
evidence to find a defendant guilty under § 666(a)(1)(A). See
Bailey, 859 F.2d at 1279. This is not that case. There was
sufficient evidence for the jury to conclude that the defen-
dants intentionally misapplied funds.
  The defendants also argue that Judge Miller abused his
discretion in refusing to allow into evidence the City’s legal
opinion, which accompanies the State’s 2000 audit report.
Evidentiary rulings are reviewed for an abuse of discretion.
United States v. White, 443 F.3d 582, 591 (7th Cir 2006). We
give “special deference to the evidentiary rulings of the trial
court.” Id. (quoting United States v. Briscoe, 896 F.2d 1476,
1490 (7th Cir 1990)).
  According to the defendants, Judge Miller’s ruling
allowing the audit report as a public document requires the
admission of the City’s legal opinion, which, under Indiana
law, is considered to be part of the report. We disagree. The
10                                   Nos. 05-1548 & 05-1549

public records exception is justified on “the assumption that
a public official will perform his duty properly and the
unlikelihood that he will remember details independently
of the record.” Fed. R. Evid. Adv. Cmmte. Note to Rule
803(8) (citing Wong Wing Foo v. McGrath, 196 F.2d 120 (9th
Cir. 1952); Chesapeake & Delaware Canal Co. v. United
States, 250 U.S. 123 (1919)). Accordingly, the language of
the rule focuses on reports of the activities of the office, and
on observations and investigations made under the author-
ity of law. The City’s response to the audit does not have
the indicia of reliability supporting the public records
exception. Judge Miller did not abuse his discretion by
ruling that it was not a public record, despite its inclusion
in one.
  Finally, the defendants attack their sentences, positing
two alternative reasons why they think Judge Miller
committed clear error in calculating a loss amount of
23.97 million dollars. United States v. Sykes, 357 F.3d 672,
675 (7th Cir. 2004). “We find clear error only when we
are ‘left with the definite and firm conviction that a mistake
has been made.’ ” United States v. Vivit, 214 F.3d 908, 914
(7th Cir. 2000) (quoting United States v. Strache, 202 F.3d
980, 984-85 (7th Cir. 2000)). The defendants do not dispute
that a total of 23.97 million was paid out for the work done
between March and May of 1999. The defendants first
argue that because the work was ratified by the City
Council and Board of Works, the loss amount must be zero.
Second, the defendants argue that Judge Miller clearly
erred by finding that the City received no benefit from the
concrete work.
  We can easily dispatch of the ratification argument. As
explained above, ratification or authorization does not ipso
facto cure a misapplication of public funds. The jury found a
misapplication of funds, and, therefore, the City of East
Chicago suffered a loss due to those improper expenditures.
The defendants nevertheless analogize this case to one
Nos. 05-1548 & 05-1549                                     11

where A tells B of his plans to purchase a lawnmower. Then
B, without permission, forges a check in A’s name to
purchase and deliver a lawnmower to A. A gets the
lawnmower he desired and presumably at the right price.
The fatal flaw in defendants’ analogy, however, is in
comparing the City of East Chicago to A. The City did not
ask for or want the sidewalks it received—it got the side-
walks as a result of a misapplication of funds. The error in
the defendants’ reasoning seems to be the flawed
logic—logic which likely got the defendants in this mess—
that they, the elected officials of East Chicago, are the City.
But the City of East Chicago is comprised of its citizens,
and these citizens are the ones who were harmed when the
defendants intentionally misapplied millions of dollars of
public funds.
  The defendants also argue that Judge Miller clearly erred
by finding the City received no value from the misapplica-
tion. While the judge agreed that an offset would be appro-
priate if value had been created from the misapplication, he
decided that all of the work, including the new sidewalks,
provided no value to the City. The defendants argue that it
defies common sense to find that the City received no value
when it is undisputed that most of the money was spent on
public sidewalks.
  We easily reject the argument, to the extent the defen-
dants make it, that any work on private property should
be considered a credit. The individuals owning the pri-
vate property may have received a benefit, but the citi-
zens of East Chicago as a whole clearly gained nothing. The
public sidewalks are more difficult. There is some force to
the defendants’ protestations that the City obviously gained
some value from the new sidewalks poured there, but this
reasoning implies that value can be thrust on unwilling
participants. The core of the misapplication charge is that
the money spent could have been spent somewhere else. We
have previously held that part of the value to be determined
12                                   Nos. 05-1548 & 05-1549

in the calculation of loss is the ability of the people through
their governmental institution to make an informed
decision. See United States v. Frost, 281 F.3d 654, 659-60
(7th Cir. 2002). We do not know if the citizens of East
Chicago would have wanted the 23.97 million spent on
concrete and other work projects because their elected
officials failed to follow the proper procedure for reaching
that decision before spending the money. A sidewalk might
have some objective value, but that does not mean the
citizens of East Chicago value it more than increased police
protection or other improved city services. The value of
losing this decision-making ability offsets any gain in side-
walks actually received.
   Our review of the evidence shows that in 1998 the City
proposed about half a million dollars of work on sidewalks,
which was completed piecemeal so as to avoid public
bidding requirements. In 1999, the Board of Works dis-
cussed more sidewalk work, but never followed through on
it. The best we can tell from this is that there may have
been an argument that the City received close to half a
million dollars in value that it would have spent on side-
walks in the absence of defendants’ crimes. But the defen-
dants do not present us with this argument, nor do we
believe it would have required the sentencing judge to
assess a credit. Gross amounts of public monies were
misspent by the defendants on sidewalks and other ser-
vices, and our review of the evidence does not lead us to the
conclusion that Chief Judge Miller clearly erred by finding
no value was created by these crimes.


                    III. CONCLUSION
  For the foregoing reasons, we AFFIRM the defendants’
sentences and convictions.
Nos. 05-1548 & 05-1549                                   13

A true Copy:
      Teste:

                      ________________________________
                         Clerk of the United States Court of
                           Appeals for the Seventh Circuit




                 USCA-02-C-0072—11-29-06
