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

Nos. 05-2639, 05-2652, 05-2692 & 06-1485
UNITED STATES OF AMERICA,
                                                    Plaintiff-Appellee,
                                  v.

JOHN J. LEAHY, WILLIAM E. STRATTON,
JAMES M. DUFF, and TERRENCE DOLAN,
                                             Defendants-Appellants.
                          ____________
            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
               No. 03 CR 922—Elaine E. Bucklo, Judge.
                          ____________
       ARGUED JUNE 9, 2006—DECIDED OCTOBER 4, 2006
                          ____________


  Before RIPPLE, MANION, and SYKES, Circuit Judges.
  MANION, Circuit Judge. This appeal stems from James
Duff’s admitted, successful schemes to cheat the City of
Chicago out of funds slotted for minority- and women-
owned businesses and to swindle various workers compen-
sation insurance providers out of proper premiums. Duff’s
expansive plots swept up many of his business associates
and family members, and this appeal consolidates a broad
range of challenges (by him and them) to pleas, jury convic-
tions, and sentences. We affirm in part and reverse in part.
2                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

                               I.
  Two complex fraud schemes hatched by James Duff, a
Chicago businessman, are at the heart of this case. Despite
the significant overlap between the participants and compa-
nies that figure in the two plots, we will discuss the facts of
each separately in the interest of clarity.


                       A. City Scheme
  In 1990, the City Council of Chicago passed an ordinance
to grant an advantage to select businesses owned by
minorities (“MBEs”) and women (“WBEs”) in the award of
city contract money. Specifically, Chicago’s Purchasing
Agent had to “establish a goal of awarding not less than
25% of the annual dollar value of all Contracts to qualified
M.B.E.s and 5% of the annual dollar value of all Contracts to
qualified W.B.E.s.” In addition to requiring the heads
of departments and agencies to work with the Purchasing
Agent to meet this goal, the ordinance also contained an
explicit provision setting aside certain contracts for qualified
MBEs and WBEs that met “target market requirements.”
Companies that wished to obtain a contract with the city,
but which were neither MBEs nor WBEs, had to commit to
expend 25% of the value of the contract with MBEs and 5%
with WBEs. The ordinance included subcontracting as one
of the various ways to fulfill this requirement. Penalties for
a contractor’s failure to meet the appropriate percentages
ranged from liquidated damages to termination.
  While the ordinance provided substantial assistance to
MBEs and WBEs, it imposed heavy restrictions on which
companies qualified. In particular, it limited its applica-
tion based both on owner involvement in the business and
the level of success achieved by the business. For a business
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                     3

to qualify as an MBE, one or more members of a minority
group must have ownership of 51% of the company, and
one or more members of a minority group must have day-
to-day management and control. The ordinance defined a
WBE in like manner, substituting women for minorities. A
figurehead minority or woman owner, therefore, would not
be enough for certification; a member of one of these select
groups must own and, for all practical purposes, run the
business.
  There was an additional limitation. Chicago prohibited
any “Established Business” from gaining this favored status.
According to the ordinance, an established business was one
which, “by virtue of its size and capacity . . . does not need
to be a participant in the Program in order to effectuate the
purposes of the Program . . . .” Giving further guidance, the
ordinance presumed a business met this definition if it (and
any affiliates) totaled $17 million in average annual gross
receipts over a three-year period. This restriction indicates
that Chicago was not interested in subsidizing entrenched,
successful businesses, even if the businesses were owned by
women or minorities. As a former city official put it at trial,
“it was a program to assist those companies to win contracts
with the City in a competitive situation and become eco-
nomically viable so that they, in fact, could compete as
prime contractors.” In other words, this was an affirmative
action program whose fruits were reserved for fledgling
minority and women businesses.
  When Chicago passed the ordinance, James Duff, a
white man, controlled numerous businesses in the city. For
purposes of the present discussion, we focus our attention
on two of those businesses. First, he controlled Windy City
Maintenance (“Windy Maintenance”), a company providing
janitorial services, which Duff incorporated in 1989. While
4                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

his mother, Patricia Green Duff (“Green Duff”), was Windy
Maintenance’s sole shareholder, this was an empty for-
mality as she had no real involvement with the business,
exercising no control over its affairs and spending con-
siderable time in vacation homes in Florida and Wisconsin.
Duff himself actually ran Windy Maintenance, making
all substantive financial and business decisions, including
hiring employees and negotiating contracts. Second,
Duff controlled a company named Remedial Environmental
Manpower (“Remedial”), which “manage[d] and provide[d]
manpower for environmental cleanup.” Remedial was
incorporated in 1988, and its purported owners were
William Stratton (“Stratton”), who owned fifty-five percent
of the stock, and Green Duff, who owned the remaining
forty-five percent. Stratton, a black man, acted as the
occasional driver and companion of Duff’s father,
a friendship dating back to earlier union days. Stratton
routinely came to the Remedial office (space shared with a
number of other Duff businesses) shortly before lunch in the
company of Duff’s father and, while there, mainly played
cards with members of the Duff family and watched
television. For the early part of its existence, Remedial was
more of an empty shell than a thriving concern, or as Duff
himself put it, “a company that didn’t work out.” To the
extent that Remedial was an actual company, however, Duff
was in charge.
  With Green Duff and Stratton in the ownership positions
of these companies, Windy Maintenance and Remedial
appeared, at least superficially, well-positioned to obtain
WBE and MBE certification after the passage of the ordi-
nance. Of course, for either to gain such a status, Duff
would need to obscure his kingship over the companies.
  Windy Maintenance was the first to try to take advantage
of the ordinance. In 1991, it applied for certification as
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                     5

a WBE, claiming in the application that Green Duff, who
used her maiden name, Patricia Green, both owned and
ran the company. Green Duff repeated this representation to
city officials during a subsequent certification interview,
and Windy Maintenance obtained the desired certification
as a WBE. Windy Maintenance retained this position for
several years, with corporate officers, such as Terrence
Dolan, submitting annual renewal applications that reiter-
ated the false description of Green Duff’s role.
  Windy Maintenance’s certification allowed it to win
lucrative contracts with Chicago and subcontracts with City
contractors specifically because of its WBE status. In
particular, Windy Maintenance entered into subcon-
tracts to provide janitorial services for a terminal at
O’Hare International Airport and the Harold Washing-
ton Library. Windy Maintenance also contracted directly
with Chicago for similar services at the city’s 911 Center and
a district of the Chicago Police Department. In 1999, Windy
Maintenance informed the city that it would no longer
apply for WBE certification as it had reached the maximum
dollar limits it could obtain under the program. Over the
years in which Windy Maintenance was certified as a WBE,
it obtained $37,512,279 from these contracts
and subcontracts. Throughout this time, Duff was totally
in charge at Windy Maintenance.
   Remedial’s big break came slightly later than that of
its sister company. In approximately 1991, Duff was ap-
proached by James Barry, a long-time friend and business
associate, to discuss providing the labor portion of a bid that
Barry’s company, Waste Management of Illinois (“Waste
Management”), was submitting to Chicago. Chicago was
looking for a company to provide construction, administra-
tion, and labor services for four new recycling centers as
6                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

part of the city’s Blue Bag recycling program. Of course,
Chicago’s involvement meant that the winning bid had to
comply with the strictures of the 1990 ordinance. Duff
responded to Barry’s solicitation that he could not only
fulfill Waste Management’s labor needs, but could do so
using a company that could achieve MBE
certification—Remedial. Remedial’s lack of work experience
did not faze Barry. He was selecting Duff, a friend and
established businessman who had consistently met Barry’s
expectations in past projects, while getting credit for hiring
an MBE. As Barry put it at trial, “it was my understanding
that no matter what the ownership structure of the company
would be, that I was going to continue to deal with Jimmy
and rely on Jimmy to operate and control.” After eventually
winning the Blue Bag contract, Waste Management desig-
nated Remedial as its MBE subcontractor in its 1993 plan to
the city.
   Obtaining certification as an MBE turned out to be a much
trickier proposition for Remedial than it had been for Windy
Maintenance. In 1993, Remedial submitted its initial certifi-
cation affidavit to the city’s purchasing agent for approval.
This application revealed that Ellen Niemeier was the sole
minority shareholder and contained no references to Duff’s
mother, Green Duff. Duff’s influence had not diminished, as
Ellen Niemeier happened to be his wife. Nonetheless, the
application raised a variety of concerns with the relevant
Chicago officials. In particular, they had questions about the
roles of Stratton and Niemeier, as well as Remedial’s overall
viability and independence, worries prompted by several
allusions to Duff and his companies on the application.
These concerns were heightened when the city contacted
clients of Remedial who indicated that they only dealt with
James Duff. Faced with a variety of red flags, the city issued
a preliminary denial of MBE status in 1993.
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                   7

  For his part, Stratton immediately and vigorously op-
posed this ruling in meetings and through a number
of filings, including an affidavit from Duff expressly
denying his involvement with Remedial. Still, the city
held strong. In 1994, however, Remedial submitted an
entirely new application that reported Stratton was the
sole owner of the business and that removed all of the
troubling references to Duff and his companies. After
another review, the city changed course and approved
Remedial as an MBE. Obtaining MBE status, Remedial
officially became an MBE subcontractor in the city’s
Blue Bag program, providing the labor for Waste Manage-
ment at the four recycling centers. During the life of its
contract with Waste Management, Remedial received
approximately $74,849,310 from the city program.
  During the 1990s, money often flowed through Windy
Maintenance and Remedial (and other Duff-controlled
companies) to American Management and Consulting
(“American”). While American was supposedly a consulting
company, in actuality Duff, its owner, basically used it as a
payroll company. Duff would instruct his payroll specialist
to transfer money from a company like Remedial to Ameri-
can, then make payments to family members and others out
of that account. Moreover, Stratton and other employees
would often receive and cash large checks, and, on Duff’s
instructions, would return the entirety of the proceeds to
Duff for his use.
  Duff’s shenanigans eventually garnered media scrutiny,
which led to a city investigation into the propriety of the
certifications. In order to evade city investigators, Duff
had office personnel spend weeks tutoring Green Duff
so that she could give the impression that she actually
ran Windy Maintenance. To complete the illusion, Duff
8                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

installed Green Duff in his actual office, going so far as to
change the buttons on the switchboard to reflect that the
main office was hers. While Green Duff had a rocky inter-
view with city inspectors, Duff convinced his employees
and business associates to corroborate the story that she was
in charge. In particular, Duff’s primary insurance agent,
John Leahy, told Adrienne Hiegel, an assistant state’s
attorney, that he met solely with Green Duff on insurance
matters for Windy Maintenance and that he had no contact
with Duff on these matters. The ruse worked, and Chicago’s
investigation faltered. Likewise, Stratton convinced city
investigators he actually ran Remedial.
  While the city could not pierce the conspiratorial curtain,
federal investigators eventually did. As will be ex-
plained further in conjunction with the insurance scheme, in
2003, Duff, Stratton, Green Duff, and Dolan were
each indicted for offenses arising out of their actions in
the city scheme.


                   B. Insurance Scheme
  We now shift our attention to Duff’s endeavors to cheat
his insurers, a fraud of even longer duration. This
scheme introduces yet another company controlled by Duff:
Windy City Labor Service (“Windy Labor”). Windy Labor
provided temporary employees to various liquor ware-
houses and other clients.
  Before detailing the scheme, a working knowledge of the
mechanics of the Illinois workers compensation system is
necessary. Illinois generally requires employers to have
workers compensation insurance. Because some em-
ployers with high risk histories would be unable to obtain
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                   9

insurance in the open, voluntary market, Illinois created
an assigned risk pool to provide insurance to these busi-
nesses. While all insurance companies providing workers
compensation insurance contribute to the assigned risk
pool, a small subset actually administer the insurance
policies in the assigned risk pool, charging higher premiums
(because of higher risks) and obtaining reimbursements for
their costs. A business can apply for assigned risk insurance
only after receiving two rejections on the voluntary market.
When a business applies, Illinois itself actually does not
decide upon the carrier but farms this task out to the
National Council on Compensation Insurance (the “Insur-
ance Council”). The Insurance Council assigns applicants to
participating insurance companies and sets advisory rates
for the calculation of premiums.
  Premiums for workers compensation insurance are
calculated using three independent factors. First, the
insurance company must determine the correct classifica-
tions for the various jobs performed by the insured’s
employees. Each type of job has an advisory rate set by the
Insurance Council, which reflects the relative riskiness of
that position. The second factor is the amount of payroll in
each job classification. The premium’s final element is the
experience modifier, a number determined by the Insurance
Council that compares an employer’s past claim history to
the past claim history of the average employer in that job
classification. If a company has a claims history that is
average in its field, the experience modifier will be one. As
the number of claims increases, so does the modifier (and by
extension, the premium). However, an extremely high
modifier, for example one reflecting double or triple the
average amount of claims, might instead indicate improper
classification of employees. The insurance company calcu-
10                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

lates the premium by multiplying the job classification rate
by the payroll and that amount by the experience modifier.
  With this background, we now examine Duff’s insurance
fraud. Windy Labor first applied for placement in the
assigned risk market through its insurance broker, John
Leahy of Leahy & Associates, in 1982. In the initial ap-
plication, Leahy described Windy Labor as a company
that “will provide various labor type jobs as they arise.
The work will vary, will include janitorial work, truck
helpers, warehousing, bottling. It is a temporary service
for labor-type work.” The initial classification codes
submitted—warehousing, bottling, janitorial, and truck
helper employees—were consistent with this information.
A report from later in the year was even more blunt in its
assessment of the Windy Labor work force: “As mentioned,
these are usually people out of work or skid row bums
working for drinking money.” The Insurance Council
assigned Windy Labor to Casualty Insurance (“Casualty”)
as its workers compensation insurance provider.
  Casualty provided Windy Labor with insurance from the
assigned risk pool until 1995. During this time, Windy
Labor applied annually for renewal of this insurance,
sending updated payroll and classification numbers. These
renewals were largely automatic between Windy Labor and
the insurance provider, but Casualty continued to
send Leahy & Associates copies of policies and applications.
For the first few years, the classifications remained constant,
but in 1985, a drastic shift occurred. The application intro-
duced a clerical workers category and, from the start, this
new classification included the largest portion of payroll,
dwarfing other more established categories such as ware-
housing and janitorial. Again, Leahy & Associates received
a copy of the policy reflecting this change from Casualty.
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                   11

Throughout the remainder of Windy Labor’s relationship
with Casualty, the clerical category continued to dominate
the other classifications, ending with over $1.7 million out
of a total payroll of approximately $2.1 million in that
category. While the categories had changed on paper,
Windy Labor had not actually shifted its operations from
labor to clerical work. Duff had decided to keep the premi-
ums down by making what would turn out to be massive
and long-term misrepresentations.
   To effectuate this scheme, Duff wove an intricate web of
lies using employees and business associates. Duff met with
auditors, giving fake figures regarding the business, and
initiated his office manager in the ways of falsely represent-
ing the employees as clerical. Windy Labor provided client
lists with false designation and engaged in delay and
suppression of payroll records.
  Red flags flew. Casualty obtained loss runs, which are
summaries of the injury claims, and showed nearly all
Windy Labor injuries coming from the warehousing
class, even though clerical was dominant. Casualty also sent
multiple notices of cancellation during the period of cover-
age because of Casualty’s inability to complete audits. While
the policy was never cancelled, Casualty transmitted these
notices to Leahy & Associates. Casualty did not catch on to
the fraud before it left the assigned risk pool in 1995.
  When Casualty left the assigned risk pool in 1995, Windy
Labor had to apply for a new assigned risk carrier. This
became a familiar refrain, as Windy Labor was left search-
ing for carriers in 1998, 1999, and 2000.1 The person at Leahy


1
    For purposes of completeness, the relevant carriers were
                                               (continued...)
12                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

& Associates responsible for the account was Edward
Wisniewski, who assumed this duty in 1989. Wisniewski’s
primary role was completing insurance applications and
contracts, though he also interfaced between Windy Labor
and the relevant insurer, passing along any concerns or
questions from one to the other.
  Despite the frequent turnover in insurance companies, the
scheme continued. Duff remained resolute in his belief that
the premiums were too high and continued to have his
office employees overstate the clerical portion of the
workforce. Complicating matters for Windy Labor,
the insurance companies expected to conduct routine audits
to verify the information on the policies. Rather than giving
the information, which would reveal the plot, Windy Labor
employees stonewalled auditors, submitted false worker
information and client lists, and even forged a letter suppos-
edly from an outside accountant that confirmed the lies.
   Windy Labor’s actions did not go completely unno-
ticed. Both USF&G and Kemper threatened to cancel their
policies for failure to submit to audits. Wisniewski was
informed and often worked with Windy Labor employees
to avert this possibility by revealing some information that
would satisfy the insurer without endangering the scheme.
This worked to some extent. For example, USF&G left the
assigned risk pool in 1998 without ever completing its final
audit. For its part, the Insurance Council tried to untangle
the disconnect between the small number of warehouse
workers and the huge number of claims emanating from


1
   (...continued)
USF&G (1995-1998), Kemper (1998-1999), Amcorp (1999-2000),
and Travelers (2000-present). We will discuss each as necessary to
illuminate the fraud.
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                   13

this class. In response, Wisniewski and Windy Labor offered
a compelling mix of rationalizations and false information,
including doctored client lists, to defuse the inquiry.
  Circumstances surrounding Kemper’s response to its
unsatisfying audit cast some additional light on the fraud.
Receiving a cancellation notice in 1999, Duff instructed his
office manager, Cathy Martinez, to call Leahy to sort out the
problem. Martinez and another Windy Labor employee,
Heather Placek, had a conference call with Leahy and
Wisniewski shortly thereafter. Without going into the
details of the situation, Martinez told Leahy that Duff asked
her to talk to him. According to Martinez, Leahy’s response
was “you know, you got to do whatever you got to do to get
this done or you’re not going to have insurance.” At this
point, Placek, who had limited exposure to the insurance
scheme, pointedly stated, “Has this occurred to anyone that
this is insurance fraud?” According to Martinez, after a
pause, Leahy again responded that Windy Labor had to do
whatever it took to get this done, or they would not have
insurance. Eventually, the plotting was rendered irrelevant
when Illinois would not let Kemper terminate the insurance
contract for procedural reasons. Still, Windy Labor’s actions
had significant repercussions. As Kemper had not been able
to complete its audit, Windy Labor was barred from
placement in the assigned risk pool. Moreover, Kemper re-
ferred Windy Labor to the Insurance Council, alerting
that organization to its belief that Windy Labor was engag-
ing in premium misrepresentation.
  The failure to complete audits, however, was not the
only red flag. Windy Labor had an extremely high ex-
perience modifier during this time because of its rampant
misclassification of its work force. At one point, the experi-
ence modifier reached 3.23, which meant that Windy Labor
14                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

had more than three times as many accidents as the average
employer in its category. As one USF&G employee testified
at trial, “this mod actually is extremely high, considering
that . . . most of the employees were clerical . . . [b]ecause
clerical positions normally don’t generate a high percentage
of loss or injury on the job.” Later, when Windy Labor was
barred from the assigned risk pool in 1999, Leahy & Associ-
ates turned to another broker, Vincent Braband, to help with
obtaining insurance in the voluntary market. While review-
ing the file, Braband immediately noticed the extremely
high experience modification factor (2.78), which was the
highest he had seen and which he took as a signal of
misclassification. This notion was confirmed when he
sent the numbers to Amcorp Insurance, whose agent also
noted the modification factor and felt that it was a clear sign
of misclassification.
  Leahy & Associates, uniformly in the person of
Wisniewski, repeatedly learned of these red flags. At one
point, USF&G contacted a Windy Labor client who actu-
ally spoke candidly (and truthfully) about what Windy
Labor workers did at his company. Upon learning of this
conversation, Wisniewski responded that the information
was wrong and relayed the issue to Duff, who pressured the
client into retracting. A few years later when Braband was
attempting to find a voluntary carrier for Windy Labor, he
inspected the file and spotted the small labor classification
with an extremely high number of manual accidents.
Together with the experience modification issue, Braband
felt the clerical was grossly overestimated and told
Wisniewski as much, explaining that he needed correct
classifications for any possibility of placement. Faced with
these objections, Wisniewski immediately submitted new
numbers to Braband, flipping the clerical payroll from $1.2
million to $600,000, the warehousing amounts from $75,000
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                 15

to $1.2 million, and the janitorial amounts from $91,000 to
$800,000. Eventually, Amcorp agreed to insure Windy
Labor, but the premium was more than three times what
Windy Labor had been paying.
  In 2000, after Amcorp declined to renew Windy Labor’s
voluntary policy because of the high rate of claims, Duff
decided to combine Windy Labor with a different Duff
company that had a good insurance track record, Remedial.
Hoping to avoid revealing Windy Labor’s experience
modifier (and take advantage of Remedial’s low modifica-
tion factor), this transaction was styled as a purchase and
not disclosed as required. Despite repeated requests by
insurance providers for information about the combination,
Wisniewski and Windy Labor/Remedial employees (includ-
ing Stratton) stonewalled and responded that no such
information was needed. On account of this tactic, Remedial
had problems obtaining insurance for the Windy Labor
portion of the business. Eventually, however, it contracted
with Travelers, which forced Remedial/ Windy Labor to
send, in 2001, a form acknowledging the merger after
Travelers threatened cancellation of its policy. Travelers
continues to provide workers compensation insurance to
Remedial, though the Insurance Council adjusted the
experience modifier based on the completed form.
  Through this extensive scheme to hide the true nature
of Windy Labor’s business, the company paid approxi-
mately $1.09 million less in premiums than it should have.


                         C. Trial
  In 2003, the federal government charged the major players
in the Duff frauds in a thirty-three count indictment cover-
ing both schemes. Basically, the indictment charged the
16                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

various defendants with violations of RICO, mail and wire
fraud statutes, money laundering, and tax offenses. Shortly
before trial, Duff pleaded guilty to all counts. Dolan fol-
lowed suit. Although Green Duff was indicted, prosecutors
declined to try Green Duff because of a rapid decline in her
mental health. Wisniewski, Leahy, Stratton, and a Remedial
supervisor, Starling Alexander, went to trial. After a month-
long trial, the jury returned guilty verdicts for all the
defendants except for Alexander, who was only tangentially
involved in the scheme.
  The district court sentenced Duff to 118 months’ imprison-
ment and ordered restitution in the amount of
$12,026,582.02. The district court sentenced Stratton to
seventy months’ imprisonment and restitution in the
amount of $7,370,739.00. The district court sentenced Dolan
to twenty-one months’ imprisonment. The district court
sentenced Leahy to forty-six months’ imprisonment and
ordered restitution in the amount of $1,093,566.00.
Wisniewski received a sentence of a year and a day and
chose not to appeal.


                              II.
  In this consolidated appeal, the defendants attack jury
convictions, pleas, and sentences. For Duff, Dolan, and
Stratton, the centerpiece of their appeals challenges the
sufficiency of the indictment, alleging that the fraud on the
city could not meet the requirements of mail or wire fraud.
Building from this foundation, Stratton, joined by Duff,
argues that, if the mail and wire fraud counts do not
constitute crimes, the money laundering charges, which rely
on them, necessarily falter. Stratton also challenges
the prejudicial spillover effect of this allegedly improper city
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                      17

scheme evidence, which he believes led to his conviction on
the RICO conspiracy and the insurance fraud counts.
  In addition to the major argument concerning the wire
and mail fraud counts, Duff raises a number of challenges to
his sentence. He first contends that the district court should
not have calculated his guidelines offense level using a $10
million loss to the city since, he claims, the city actually lost
nothing on the contracts. Duff also asserts that the district
court erred by not awarding him a full three-point reduction
for acceptance of responsibility and by applying several
improper enhancements. Finally, Duff argues that restitu-
tion to Chicago was improper, returning to his theme that
the city suffered no loss.
  Leahy, for his part, begins with a sufficiency of the
evidence challenge and also contends that the district court
erred by delivering an “ostrich” jury instruction. Leahy also
faults the district court for a range of evidentiary decisions.
He proceeds to argue that the district court erred by not
severing the trial of the insurance fraud counts from the trial
of those counts involving the city scheme. Leahy concludes
his challenges by asserting that the district court improperly
calculated the period of his involvement in the conspiracy,
which redounded to his detriment at sentencing.


STRATTON, DUFF, AND DOLAN’S TRIAL, PLEA, AND
            SENTENCING ISSUES
                               A.
  We first consider Duff, Dolan, and Stratton’s argument
that the city scheme referenced in the indictment cannot
support a conviction under the applicable mail and wire
fraud statutes. Specifically, they contend that the only loss
Chicago suffered was to its regulatory interests—an intangi-
18                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

ble right unprotected by these statutes. We review a chal-
lenge to the sufficiency of an indictment de novo. See United
States v. Gee, 226 F.3d 885, 891 (7th Cir. 2000); United States
v. Briscoe, 65 F.3d 576, 582 (7th Cir. 1995).
  We begin our evaluation of the indictment’s validity by
examining the words of the relevant statutes, the first be-
ing mail fraud.
     Whoever, having devised or intending to devise any
     scheme or artifice to defraud, or for obtaining money or
     property by means of false or fraudulent pretenses,
     representations, or promises . . . for the purpose of
     executing such scheme or artifice or attempting so to do,
     places in any post office or authorized depository for
     mail matter, any matter or thing whatever to be sent or
     delivered by the Postal Service, . . . shall be fined under
     this title or imprisoned not more than 20 years, or both.
18 U.S.C. § 1341.
  “The elements of wire fraud under 18 U.S.C. § 1343 di-
rectly parallel those of the mail fraud statute, but require the
use of an interstate telephone call or electronic communica-
tion made in furtherance of the scheme.” Briscoe, 65 F.3d at
583. The requisite elements of these offenses, therefore, are
three: (1) a scheme to defraud; (2) an intent to defraud; and
(3) use of the mails or wires in furtherance of the scheme.
See United States v. Henningsen, 387 F.3d 585, 589 (7th Cir.
2004); United States v. Britton, 289 F.3d 976, 981 (7th Cir.
2002). Cases construing one are equally applicable to the
other. See United States v. Stephens, 421 F.3d 503, 507 (7th Cir.
2005). To show the intent to defraud, we have consistently
required a “wilful act by the defendant with the specific
intent to deceive or cheat, usually for the purpose of getting
financial gain for one’s self or causing financial loss to
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                     19

another.” Britton, 289 F.3d at 981. See also United States v.
Davuluri, 239 F.3d 902, 906 (7th Cir. 2001); United States v.
Hickok, 77 F.3d 992, 1003 (7th Cir. 1996) (stating that mail
and wire fraud are specific intent crimes). These statutes do
not require the government to prove either contemplated
harm to the victim or any loss. See United States v. Vincent,
416 F.3d 593, 600-01 (7th Cir. 2005) (addressing loss); United
States v. Fernandez, 282 F.3d 500, 507 (7th Cir. 2002) (discuss-
ing contemplated harm). Moreover, a defendant’s honest
belief that his actions will ultimately result in a profit and
not a loss is irrelevant for determining whether a violation
has occurred. See Davuluri, 239 F.3d at 906; United States v.
Masquelier, 210 F.3d 756, 759 (7th Cir. 2000).
  The mail and wire fraud counts of the indictment dedi-
cated to the city scheme (Counts 2-15) charged that
Duff, Stratton, Dolan, and others hatched and executed
a plan to obtain fraudulently over $100 million in con-
tracts and subcontracts from the city of Chicago by lying
about the Windy Maintenance and Remedial ownership
structure. The indictment goes on to detail precisely how
Duff and the others used or caused to be used the mails and
wires in furtherance of this scheme.
  The defendants, however, believe that, despite its ex-
press references to the money they obtained, the indictment
did not allege a deprivation of money or property. They
arrive at this interesting conclusion by positing that Windy
Maintenance and Remedial fulfilled their obligations under
the relevant contracts or subcontracts. The argument
continues that because the city would ostensibly have paid
the same for the provided services regardless, Chicago lost
no money. According to the defendants, Chicago only lost
a regulatory interest in controlling exactly where its money
went. They conclude, therefore, that the mail and wire fraud
20                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

counts of the indictment charged an intangible rights
scheme, which cannot survive under Supreme Court
precedent like McNally v. United States, 483 U.S. 350 (1987)
and, more recently, Cleveland v. United States, 531 U.S. 12
(2000).
  Despite the defendants’ contortions to squeeze this case
into the intangible rights category, we cannot agree that it is
such a case. The mail and wire fraud statutes require that
the object of the fraud is money or property, rather than an
intangible right.2 See Cleveland, 531 U.S. at 15 (stating that
“for purposes of the mail fraud statute, the thing obtained
must be property in the hands of the victim”); McNally, 483
U.S. at 360. In Cleveland, the scheme turned on defrauding
the government out of a video poker license by making false
statements on the licensing application. Id. at 15-17. The
Supreme Court indicated that a violation of § 1341 or § 1343
must implicate a government’s role as a property holder, not
just its role as sovereign. Id. at 23-24. In Cleveland, the Court
found that falsely obtaining a license did not. Id. at 21-23.
The Court noted that the licenses sought “do not generate
an ongoing stream of revenue” and, importantly for the
present case, “the Government nowhere alleges that Cleve-
land defrauded the State of any money to which the State
was entitled by law.” Id. at 22. Turning its attention to the
government’s argument that the state had a right to
choose to whom it would award a license, the Court re-
sponded that this was not a property right, but an intangible
right—the power to regulate. Id. at 23.


2
  We, of course, acknowledge a limited exception to this rule for
the deprivation of the “intangible right of honest services.” 18
U.S.C. § 1346. Congress grafted this additional ground for mail
and wire fraud on to the money and property requirement
in response to McNally. See Cleveland, 531 U.S. at 19-20.
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                    21

   In our case, however, the scheme precisely and directly
targeted Chicago’s coffers and its position as a contract-
ing party. As opposed to the situation in Cleveland, the
indictment here alleges a plot with an aim different from
obtaining licenses or certifications. Cleveland addresses a
situation in which a defendant commits fraud against a
governmental body only acting as regulator; here the
fraud was committed both against Chicago as regulator and
also against the city as property holder. The certifications
were necessary steps, but they were not the object of the
long-ranging fraud. That object was money, plain and
simple, taken under false pretenses from the city in its role
as a purchaser of services.
  We cannot agree with the defendants that previous
cases from our court aid their quest to remove the present
fraud from the reach of the federal mail and wire fraud
statutes. In United States v. Ashman, 979 F.2d 469, 479 (7th
Cir. 1992), we found that one aspect of a fraudulent trad-
ing scheme did not qualify as mail or wire fraud under
the federal statutes because there was no possibility of a loss
given the structure of the daily trading rules. Put another
way, while fraud occurred, no money or property was
possibly at issue, so these limited segments of Ashman’s
overarching fraud could not be punished under § 1341 or
§ 1343. See id. The defendants try to fit the present case
under Ashman by arguing that Waste Management and
other such general contractors had agreed with Chicago for
a price for labor or janitorial services, and the price was
inflexible, regardless of the fraud. This is a much different
case from Ashman, which involved a complete physical
impossibility of loss due to the way that the trading market
was set up. In this case, Chicago simply received one type
of services it contracted for through these
subcontracts—cleaning and janitorial services. Chicago
22                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

completely lost the other type of services for which it was
paying the contractors and the Duff companies—services
performed by an MBE or an WBE precisely because the
company is a qualified MBE or WBE. Windy Maintenance
and Remedial would not have received the subcontracts,
and the general contractors ostensibly would not have won
the bids, without the fraudulently gained certifications.
Chicago suffered a loss of money in that it paid for a service
provided by an MBE or WBE that it did not receive, and
Ashman does not compel us to conclude otherwise.
  Nor do we believe this case similar to United States v.
Walters, 997 F.2d 1219 (7th Cir. 1993). In that case, a sports
agent signed secret contracts to become the agent for a
variety of athletes while they were still in college and
receiving scholarship money. See id. at 1221. The govern-
ment’s theory was that Walters committed fraud by causing
the universities to pay scholarship money to students who
were ineligible, thus resulting in a loss of money to the
universities. See id. We found the prosecution defective
because the universities “were not out of pocket to Walters.”
Id. at 1224 (emphasis in original). Walters did not obtain any
money from the universities as part of his scheme to
defraud. In this case, Duff and his cronies engaged in a
fraud directly targeting the city and, unlike Walters, obtain-
ing money from Chicago through the fraudulent scheme.
  Looking at the requirements for mail and wire fraud, the
indictment establishes each element. First, it alleges a
scheme to defraud the city of money by obtaining con-
tracts through false pretenses. Both the direct contracts with
Chicago and the various subcontracts would not have been
awarded in the absence of the MBE/WBE certifications
obtained through fraud. Second, the indictment shows an
intent to defraud Chicago out of its money by engaging in
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                          23

this practice. As stated above, it does not matter that Duff
and his cronies thought that Chicago was getting a service
worth every dime in the contracts.3 All that is required is a
wilful act with the intent to deceive or cheat by each of the
defendants, which the indictment demonstrates. Specifi-
cally, Duff deceived Chicago regarding the true status of his
companies. Finally, the mails and wires were used in
furtherance of the scheme. Therefore, we conclude that the
district court correctly rejected the defendants’ argument
challenging the sufficiency of the indictment.4


3
   As the government clearly stated at oral argument, Chicago
was aware that the services rendered by the MBEs or WBEs
would not be the most efficient or the lowest-priced possible.
Nonetheless, the “city was willing to pay these premiums [ ] to
these MBE/WBE contractors in order to foster their growth and
to permit them to earn a profit that they would otherwise not
have access to on a purely open bidding system.” A corollary
of this proposition is that an efficient, established business, given
the advantage of MBE/WBE status, would earn more than it
would normally receive under a truly open bidding system,
in which it would compete against similarly established com-
panies with the same experience and efficiencies of scale. Duff
was a highly experienced businessman who easily made substan-
tial profits off the MBE/WBE contracts and paid the surplus to
family members and associates who performed little or no work
for the various entities under contract. At sentencing, the district
court emphasized that the goal of Chicago’s program was
fundamentally frustrated, remarking “it’s a double loss, the loss
that we computed and the real loss to all the people that didn’t
get this business, that didn’t get a chance to build their busi-
nesses, . . . that didn’t get a chance to become successful minority-
and women-owned businesses, because this huge amount was
diverted.”
4
    Given our decision that the indictment properly alleged
                                              (continued...)
24                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

                               B.
  We proceed to Duff’s contention that the district court
improperly calculated his offense level on the fraud convic-
tions because Chicago suffered no loss. Both parties agree
that Guideline § 2F1.1 applies to this case. This guideline
provides a base offense level for crimes involving fraud and
deceit, then increases the offense level depending on the
amount of money at issue. U.S.S.G. § 2F1.1(1998). We review
the definition of loss de novo, and the district court’s
calculation of the amount of loss for clear error. See United
States v. Vivit, 214 F.3d 908, 914 (7th Cir. 2000). Here, the
district court determined that the amount of loss was the
amount of profits that Duff gained from the city scheme.
  We agree with Duff that the district court incorrectly
calculated the amount of loss, but this result will likely not
mollify him because we further believe that the district
court’s figure was too low, not too high. Generally, loss
under § 2F1.1 “is the value of the money, property, or
services unlawfully taken.” U.S.S.G. § 2F1.1 application note
8. As the district court concluded, however, a different,


4
   (...continued)
offenses under § 1341 and § 1343, Duff and Stratton’s challenge
to the money laundering convictions also must fail as it is
based solely on the alleged impropriety of the mail and wire
fraud charges. Stratton further claims that evidence of the
city scheme had an improper prejudicial spillover effect that led
to his conviction on both the RICO count (Count 1) and a count of
mail fraud relating to his limited participation in the insurance
scheme (Count 22). This argument hinges on the contention that
the mail and wire fraud charges should have been dismissed and
the evidence should not have been presented. As we have ruled
that Chicago’s scheme charges were proper, this argument
likewise must fail.
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                       25

more specific, application note applies in this situation.
Application note 8(d) provides: “In a case involving diver-
sion of government program benefits, loss is the value of the
benefits diverted from intended recipients or uses.” Duff
argues that this is not a case of “government program
benefits” and that the application note governing contract
procurement should apply. Duff is wrong. As the ordinance
itself states, “[a]n effort to direct contracts to minority- and
women-owned businesses is required to eradicate the effects
of discrimination.” This was an affirmative action program
aimed at giving exclusive opportunities to certain women
and minority businesses. The contracts which these busi-
nesses received pursuant to this type of program constitute
government benefits. We are not alone in this conclusion.
See United States v. Bros. Constr. Co. of Ohio, 219 F.3d 300,
317-18 (4th Cir. 2000). Application note 8(d), therefore,
applies.
   The district court, however, erred when it did not calcu-
late the loss under application note 8(d). Instead of comput-
ing the total “value of the benefits diverted from intended
recipients or uses” in its analysis, it used the contract loss
formula of “contract price minus the benefit provided.”
Once the district court determined that this was a case
involving diversion of government benefits, however, it was
bound to follow the application note that governed this
situation. See United States v. Sorensen, 58 F.3d 1154, 1158-59
(7th Cir. 1995). The correct amount under application note
8(d) is the value of the benefits diverted, which was over
$100 million.5


5
  To its credit, the district court itself expressed reservations
about using the contract method of evaluating loss, stating “[i]n
                                                    (continued...)
26                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

  Nonetheless, a remand is unwarranted because the
government did not cross-appeal on this issue. Moreover,
the fraud counts were grouped with the money launder-
ing counts pursuant to Guideline § 3D1.2(d), and Duff
was sentenced based on the money laundering convic-
tions, as they carried the highest offense level. U.S.S.G.
§ 3D1.3. Even including the proper amount of the loss
attributable to the wire and mail fraud, it appears that the
money laundering offense level would still be higher, so
a remand would change nothing.


                              C.
   Turning to Duff’s next challenge, he believes that he
was entitled to a three-point reduction in his offense
level because of his acceptance of responsibility. As this
is a factual finding, we review the district court’s deci-
sion not to award any points for clear error. See United States
v. Gilbertson, 435 F.3d 790, 798 (7th Cir. 2006); United States
v. McIntosh, 198 F.3d 995, 999 (7th Cir. 2000). The defendant
bears the burden of proving that he deserves such a reward.
See McIntosh, 198 F.3d at 999. We afford the district court
large discretion in making this determination because the
sentencing “judge is in a ‘unique position to evaluate a
defendant’s acceptance of responsibility.’ ” Gilbertson, 435
F.3d at 799 (quoting U.S.S.G. § 3E1.1, cmt. 5). We allow
district courts to exercise common sense when evaluating
the testimony and the defendants. See McIntosh, 198 F.3d at
999. An appellate court is inherently ill-equipped to make


5
  (...continued)
writing this opinion, I am less convinced that I was correct in
determining ‘loss’ not to be the entire amount of the contract.”
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                     27

this determination by the very nature of our review, as we
face a cold record, while the district court actually heard the
tenor of the defendant’s words and studied his attitude. See
Gilbertson, 435 F.3d at 799.
  Guideline § 3E1.1 provides that a court is to give a two-
point reduction if the defendant “clearly demonstrates
acceptance of responsibility for his offense,” and that a court
may give an additional point if the acceptance is timely. The
application notes to this guideline lay out a variety of
factors that a court should consider when making this
determination. Among these factors are whether the
defendant truthfully admitted the conduct, whether the
defendant voluntarily made restitution prior to adjudication
of guilt, whether the defendant gave voluntary assistance in
the recovery of the fruits of his offenses, whether the
defendant underwent post-offense rehabilitative efforts, and
the timeliness of the defendant’s acceptance of responsibil-
ity. U.S.S.G. § 3E1.1 application note 1.
  The district court did not clearly err when it refused
to decrease Duff’s offense level. Duff suggests that the
district court did not attach enough weight to his factual
basis, plea of guilty, and expressions of remorse, while
emphasizing too greatly his less-than-forthcoming atti-
tude at the plea hearing. Given the amount of latitude
we afford to the district courts in this arena, we disagree.
  First, the district court judged that Duff’s plea did not
reflect a true belief that he was culpable, but a calculated
decision to gain the advantage of the reduction. Acceptance
of responsibility usually will be awarded after a guilty plea,
but such a plea does not transform this reduction into a
matter of right. See United States v. Willis, 300 F.3d 803, 807
(7th Cir. 2002); United States v. Bothun, 424 F.3d 582, 586 (7th
Cir. 2005). Looking at the factual basis and plea hearing,
28                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

Duff made halting admissions, even to simple questions,
and refused to go beyond the bare bones of the indictment,
making the government and the district court struggle to
obtain many crucial answers about the city scheme. Duff did
accept and admit many of the non-critical portions of the
indictment, but consistently fought to reframe the city
scheme in his own best interests. While a “ ‘defendant is not
required to volunteer, or affirmatively admit, relevant
conduct beyond the offense of conviction in order to obtain
a reduction,’ ” United States v. Carroll, 346 F.3d 744, 750 (7th
Cir. 2003) (quoting U.S.S.G. § 3E1.1 application note 1(a)),
this does not mean that the district court must blind itself to
a defendant’s conduct and attitude when pleading guilty,
especially as here when the defendant seems to be using the
plea hearing to minimize his activity to evade future
scrutiny. If the defendant takes an overly aggressive
posture, this could mean that he does not actually accept his
fault. We cannot categorically say that a district court must
ignore such indications simply because a guilty plea is
involved.
  Still, if Duff’s conduct at the plea hearing constituted the
district court’s only justification for denying this reduc-
tion, we would be faced with a very close case. But here, the
district court went further both at the sentencing hearing
and in its sentencing memorandum and catalogued addi-
tional support for its conclusion that Duff did not really
think he was not to blame, no matter his mouthed words of
remorse. Specifically, the district court mentioned that
Duff’s contention that “no one else could have done the
contracts” showed no appreciation for the harm he caused.
The district court was also disturbed by Duff’s failure to
acknowledge a fact conclusively demonstrated at trial—that
Duff used his companies to pay Stratton and family mem-
bers even though they did no work. As application note 1(a)
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                     29

states, “a defendant who falsely denies, or frivolously
contests, relevant conduct that the court determines true has
acted in a manner inconsistent with acceptance of responsi-
bility.” U.S.S.C. § 3E1.1 application note 1(a). The district
court had extensive opportunities to observe and listen to
Duff and determine whether he was sincerely contrite or
engaged in spin. Based on our searching review of the plea
hearing, the sentencing hearing, and the sentencing memo-
randum, we cannot say that the district court abused its
discretion in concluding that Duff had failed to accept
“moral responsibility” for his crimes.
   Ultimately, however, even if we believed that the dis-
trict court committed some error regarding acceptance of
responsibility, it was harmless. In its sentencing memoran-
dum, the district court stated “[s]ince this sentence, under
Booker, is not limited to consideration of a narrow range
following a strict determination of points under a particular
Guidelines Manual, however, I considered the sentencing
range that would be applicable with or without acceptance
of responsibility.” The transcript from the sentencing
hearing also shows the district court properly calculated
guideline ranges both with and without the acceptance of
responsibility points. The court then decided upon a
sentence of 118 months and gave a lengthy explanation both
at the hearing and in the memorandum regarding its
decision. As the sentence would have been imposed no
matter the ruling on acceptance of responsibility, Duff
suffered no harm.6


6
  In the event that we had ruled in his favor on the fraud and
money laundering counts, Duff presented several additional
arguments regarding enhancements. As we did not agree with his
                                                  (continued...)
30                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

                              D.
  Moving to his actual sentence, Duff mounts a reasonable-
ness challenge. After Booker, a district court must “first
consult a properly calculated advisory Guidelines range and
then, by reference to the factors specified in § 3553(a), select
a sentence either inside or outside the advisory range.” See
United States v. Walker, 447 F.3d 999, 1007 (7th Cir. 2006).
This is a distinction with a difference in our post-Booker
world, since a sentence within the guideline range is
presumptively reasonable, see United States v. Owens, 441
F.3d 486, 490 (7th Cir. 2006), while a sentence outside the
guideline range requires more explanation based on the
§ 3553(a) factors, see Walker, 447 F.3d at 1007. The parties
agreed at the sentencing hearing that without the acceptance
of responsibility reduction the guidelines range would be
108-135 months and if acceptance of responsibility was
counted, the range would drop to 78-97 months. Taking the
district court at its word that the 118-month sentence
applied with or without the acceptance of responsibility
points, this sentence could be deemed either outside the
guideline range or within. We will only examine the
sentence as one outside the range since if the sentence
survives this more searching review, it would obviously
suffice if within the range (and presumptively reasonable).
   The district court adequately explained the reasons for
its sentence, examining the various § 3553(a) factors in
detail. In particular, the district court mentioned the severity
of the offenses, which defrauded victims of over one
hundred million dollars. The offenses were not one-time
affairs, but the long-term duping of the victims by flooding


6
  (...continued)
various positions, these arguments are moot.
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                      31

them with a coordinated attack of falsehoods. Even more
troubling, Duff used and corrupted his employees and his
own family, particularly his mother and wife, to satisfy his
greed. Moreover, the district court also laid emphasis on
Duff’s ready willingness to flout laws to gain his criminal
objectives and the apparent difficulty in deterring a man
who would engage in these types of dealings for over a
decade. The district court then assessed the nature and
circumstances of Duff’s character, which further condemned
him. He acted out of avarice, not necessity, and, as became
clear at trial, threatened and bullied others to get his way.7
In short, the district court had a thoughtful and meaningful
analysis regarding why Duff’s crimes merited 118 months
of imprisonment. Our review is deferential, as the district
court was in the best position to judge. See Walker, 447 F.3d
at 1008. The district court’s evaluation gave a mountain of
reasons for a sentence outside the guidelines range, and we
find the sentence reasonable.


                               E.
  Duff finally argues that the district court’s restitution
order in the amount of $10,933,016.02 for Chicago was
improper as Chicago did not lose any money under the
contracts. Again, we reject Duff’s contention. We review the
amount of restitution for abuse of discretion. See United


7
  The trial provided a particularly insightful glance into Duff’s
personality through the testimony of his own employees,
auditors, and clients, which demonstrated his willingness to
scream, bully, and threaten (including threats of harm against
another’s family) to get his way.
32                   Nos. 05-2639, 05-2652, 05-2692 & 06-1485

States v. Brierton, 165 F.3d 1133, 1139 (7th Cir. 1999). The
Mandatory Victims Restitution Act (“MVRA”) provides that
restitution will be ordered to any victim for “an offense
against property under this title, including any offense
committed by fraud or d ecei t.” 18 U.S.C.
§ 3663A(c)(1)(A)(ii). The MVRA defines a victim as any
person directly harmed by a defendant’s criminal conduct
in the course of a scheme, see United States v. Belk, 435 F.3d
817, 820 (7th Cir. 2006); 18 U.S.C. § 3663A(a)(2), and a
government agency can be a victim for these purposes,
see United States v. Sapoznik 161 F.3d 1117, 1121 (7th Cir.
1998). To calculate the restitution amount, the district
court must determine the loss caused by the crime, which is
the greater of (1) the value of the property on the date of the
damage, loss, or destruction, or (2) the value of the property
on the date of sentencing. Belk, 435 F.3d at 819; 18 U.S.C.
§ 3663A(b)(1)(B). The court then subtracts from that amount
the value of any returned property. Id. Duff contends that
since his companies performed the contracts, and performed
them well, the companies returned full value to Chicago for
its money and that restitution should not be required.8
  Again, Duff misses the point. The contracts were not
simply for cleaning and labor services but for rendering
services by legitimate MBE/WBEs. While Duff’s com-
panies provided valuable cleaning services, they could
not possibly return Chicago’s property because they


8
   Duff also suggests, without developing the argument, that it is
in some way inequitable for a district court to order restitu-
tion and forfeiture in the same amount. While we recognize to the
untrained eye, this might appear to be a “double dip,” restitution
and forfeiture serve different goals, and we have approved of this
practice in the past. See United States v. Emerson, 128 F.3d 557, 566-
67 (7th Cir. 1997).
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                   33

could not achieve Chicago’s desired goal of developing
and sustaining an emerging minority business. As the
government mentioned at oral argument, Chicago was not
looking for the best deal possible on these contracts pre-
cisely because it wanted to give the money to nurture
particular recipients—MBEs and WBEs. Therefore, perform-
ing the contract adequately did not provide the consider-
ation for which Chicago bargained: it did not support the
proper minority or women businesses.
  The question then becomes whether the district court’s
restitution amount was a correct approximation of the
difference between the services rendered and what the
city anticipated from a contract with a proper MBE or WBE.
We find some guidance from the Sapoznik case
cited previously. Sapoznik was a suburban police chief who
received $500 per month for four years from the Mafia to
shield its gambling interest in his town. See Sapoznik, 161
F.3d at 1118. The district court ordered restitution to the
town in the amount of one year’s salary as police chief. See
id. at 1121. We recognized that the town likely would
have never hired Sapoznik had it known of his easy
virtue, which would mean that it would not have paid
him salary for any of his four years as chief. Id. However,
we also understood that the town would not have saved the
entire amount of his salary, as the government suggested,
because “it would have hired an honest police chief and
paid him the same.” Id. After noting that most of his work
was exemplary, we found that the restitution order, which
generously credited Sapoznik for providing value to his
employer for three-quarters of his salary despite his infidel-
ity was proper. Id. at 1122. “Given the difficulty of estimat-
ing the loss that he actually imposed on the city (as opposed
to the gain that he conferred on the gambling dens and the
34                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

Mafia), we think the district judge acted within the limits of
her discretion.” Id.
  In the present case, we confront a similar situation in
which the actual loss to Chicago from not enlisting a true
MBE or WBE for these contracts is inherently difficult
to quantify. Faced with this situation, we determine that the
loss amount calculated by the district court, which effec-
tively credits the Duff companies as being worth to Chicago
approximately 90% of a proper MBE/WBE, is a generous
credit in favor of Duff. Given the wide latitude we afford a
district court in this situation, we conclude that the district
court did not abuse its discretion when calculating the
restitution amount.


      LEAHY’S TRIAL AND SENTENCING ISSUES
                              F.
  We now address the issues arising from Leahy’s trial
and sentencing. First among these is his belief that the
government did not produce sufficient evidence to convict
him of mail and wire fraud in connection with the insurance
scheme. Closely tied to this assertion is Leahy’s theory that,
given the paucity of the evidence against him, the district
court should not have given an ostrich instruction, which
allowed the jury to convict him despite the insufficient
evidence.
  Turning first to the sufficiency of the evidence, Leahy, like
all such challengers, carries a heavy burden. We view the
evidence in the light most favorable to the prosecution. See
United States v. Tadros, 310 F.3d 999, 1005-06 (7th Cir. 2002).
We find the evidence insufficient only if no rational trier of
fact could have found guilt beyond a reasonable doubt. See
id. at 1006. As Leahy was convicted of multiple counts of
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                  35

mail and wire fraud arising out of the insurance scheme, we
examine any evidence of a scheme to defraud, an intent to
defraud, and use of mails and wire to further it. See United
States v. Seward, 272 F.3d 831, 835 (7th Cir. 2001).
  Even looking at the evidence in the light most favorable to
the government, this is a relatively close case. The 1999
telephone call about the Kemper notice of cancellation,
together with the circumstances surrounding this call,
were the strongest pieces of evidence tying Leahy to the
scheme. As discussed previously, Windy Labor received
a notice of cancellation from Kemper, its insurer, for fail-
ure to complete an audit. Martinez, the Windy Labor
employee who worked most closely on the insurance fraud,
turned to Duff. For his part, Duff commanded Martinez
to call Leahy. During the conference call, Leahy ex-
hibited knowledge that Kemper wanted to cancel the policy
based on an inability to complete its audit. He did not react
with surprise. Rather, he suggested that Windy Labor had
to do whatever necessary to obtain insurance. When Placek
expressed her feeling that they were perpetrating insurance
fraud, Leahy did not disagree. There was simply silence,
eventually broken by Leahy, who reiterated his feeling that
the options were either do whatever needed to be done or
have no insurance. Taking the evidence in the light most
favorable to the government, it seems unlikely that Duff
would involve Leahy in such a sensitive matter unless
Leahy knew about the scheme. Moreover, the testimony
about this phone call shows Leahy was aware of the prob-
lems with the audit and felt that anything, including
insurance fraud, was authorized to defuse the potential
bomb. This is strong evidence of Leahy’s involvement.
  However, this was not the only evidence suggesting
Leahy’s role in the insurance scheme. The Windy Labor
36                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

account was a haven of red flags that would be obvious
to anyone familiar with workers compensation insurance.
At trial, multiple insurance witnesses testified that the
experience modifier for Windy Labor in the 1990s was
extremely high, which was a clear tip-off that there might be
serious job misclassification. In fact, several of the witnesses,
including a Kemper auditor with over twenty years of
experience and Braband, the experienced insurance broker,
stated that they had never come across a modifier that high.
Besides the high experience modifiers, the loss-run informa-
tion constituted another red flag. As explained previously,
the loss runs showed the type of claims filed and the
classification of the employees who filed them. The loss runs
compiled for Windy Labor indicated that the injuries were
occurring almost entirely in the labor categories and
involved more employees than were actually in that cate-
gory. This takes on particular significance considering that
applications and policies sent to Leahy & Associates, and
sometimes generated by Leahy & Associates, showed that
the workforce was almost entirely clerical. Finally, insurance
companies repeatedly issued notices of cancellation to
Windy Labor, with copies to Leahy & Associates, for failure
to properly complete the audits.
  Taking the evidence in the light most favorable to the
prosecution, these red flags are strong circumstantial
evidence. While there is no direct evidence that Leahy
looked at any of this information, he would have had
to completely ignore this part of his business for the
better part of a decade in order to miss it. Contradicting this
possibility, Maribel Gomez, one of his employees, described
Leahy at trial as hands-on boss who was aware of the
happenings on the policies. The chance that he simply was
not aware of the doings at his own company seems even
more unlikely when one considers that it was Leahy, not
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                     37

Wisniewski, who was Duff’s connection at Leahy & Associ-
ates. Moreover, it seems most improbable that Wisniewski
would cooperate in massive fraud for one of Leahy’s family
friends without Leahy having something to do with it.
Bolstering this point was Leahy’s willingness to protect
Duff’s fraud against Chicago by misleading the investiga-
tors regarding the true structure of Windy Maintenance. The
evidence of the 1999 telephone conference, combined with
numerous, significant red flags on the account and the
circumstances suggesting his involvement, provide suffi-
cient evidence to support the jury verdict.
  This brings us to the propriety of the ostrich instruction,
which assumes additional significance given the relatively
thin evidence here. The ostrich—or deliberate avoidance—
instruction is used to inform the jury that the legal definition
of knowledge includes deliberate avoidance of knowledge.
United States v. Fallon, 348 F.3d 248, 253 (7th Cir. 2003). The
district court instructed the jury:
    Knowledge may be proved by the defendants’ conduct
    and by all the facts and circumstances surrounding
    the case. You may infer knowledge from a combina-
    tion of suspicion and indifference to the truth. If you
    find that a person had a strong suspicion that things
    were not what they seemed or that someone had with-
    held some important facts yet shut his eyes for fear of
    what he would learn, you may conclude that he acted
    knowingly as I have used that word. You many not
    conclude that the defendant had knowledge if he was
    merely negligent in not discovering the truth.
This instruction was nearly identical to the pattern Seventh
Circuit jury instruction on this subject, see United States
v. Carrillo, 435 F.3d 767, 779 (7th Cir. 2006), and Leahy
does not argue that the formulation of the instruction
38                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

was error. Rather, Leahy argues that evidence is insufficient
to support the ostrich instruction. We review the district
court’s decision to give this instruction for an abuse of
discretion, viewing the evidence in the light most favorable
to the government. See United States v. Craig, 178 F.3d 891,
896 (7th Cir. 1999); United States v. Trigg, 119 F.3d 493, 504
(7th Cir. 1997).
  The ostrich instruction is appropriate if a defendant claims
a lack of guilty knowledge and the evidence supports an
inference of deliberate avoidance. See, e.g., Fallon, 348 F.3d
at 253. This second prong means that a defen-
dant deliberately avoided acquiring knowledge of the crime
being committed by cutting off his curiosity through an
effort of the will. Id. Inherent in this instruction is the
difficulty in distinguishing between the cutting off of
one’s curiosity and a simple lack of effort. See Carrillo,
435 F.3d at 780. The latter cannot be punished.
  Leahy only attacks the second prong of the ostrich
instruction requirements, contending that the evidence
did not support an inference of deliberate avoidance but
only showed a simple lack of effort. Taking the evidence
in the light most favorable to the government, we cannot
agree and do not believe that the district court abused its
discretion when it gave this instruction. The evidence, while
not overwhelming, offers several indications that Leahy hid
his head in the sand regarding the insurance fraud. We
briefly return to ground already ploughed in our sufficiency
of the evidence discussion. During the Kemper cancellation
discussion, Leahy asked no questions about the audit
problems and did not even question the allegation that
fraud might be involved. “[F]ailure to ask questions that
would certainly arise from the circumstances . . . is evidence
that could lead a jury to determine [the defendant] deliber-
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                    39

ately avoided learning about the [ ] scam.” Craig, 178 F.3d
897-98. As demonstrated above, Leahy would have been
exposed to numerous red flags, obvious to someone with his
training and experience, over the duration of his business
relationship with Windy Labor. Contrast his claimed
ignorance despite years of involvement with these accounts
with the reaction of Braband, who immediately realized that
the Windy Labor numbers were misclassified after a short
review of the file. Taking the evidence in the light most
favorable to the government, we cannot say that the evi-
dence only shows a case of negligence. Rather, it
shows repeated indications of deliberate avoidance by
Leahy, and, given this conclusion, the inclusion of the
ostrich instruction was appropriate.


                              G.
  We next turn our attention to Leahy’s various evidentiary
challenges. We review such claims for abuse of discretion.
See United States v. McGee, 408 F.3d 966, 981 (7th Cir. 2005);
United States v. Anifowoshe, 307 F.3d 643, 646 (7th Cir. 2002).
  Leahy first contends that the testimony of Hiegel (the
assistant state’s attorney who investigated the city
scheme) constituted prohibited propensity evidence. Federal
Rule of Evidence 404(b) generally excludes the introduction
of bad acts “to show that a defendant has a propensity to
commit a crime and that he acted in accordance with that
propensity on the occasion in question.” United States v.
Chavis, 429 F.3d 662, 667 (7th Cir. 2005). Bad acts evidence
may be admitted, however, for other purposes, such as to
show intent, knowledge, lack of mistake, motive, or oppor-
tunity. See id. We utilize a four-part standard to assess the
admissibility of evidence under Rule 404(b):
40                 Nos. 05-2639, 05-2652, 05-2692 & 06-1485

     (1) the evidence is directed toward establishing a matter
     in issue other than the defendant’s propensity to com-
     mit the crime charged, (2) the evidence shows that the
     other act is similar enough and close enough in time to
     be relevant to the matter in issue, (3) the evidence is
     sufficient to support a jury finding that the defendant
     committed the similar act, and (4) the evidence has
     probative value that is not substantially outweighed by
     the danger of unfair prejudice.
Anifowoshe, 307 F.3d at 646.
  Here, the district court properly admitted the evidence.
Hiegel was investigating Windy Maintenance for fraud
on the city relating to the WBE program when she discussed
Green Duff’s role with Leahy. Leahy falsely informed her
that he exclusively met with Green Duff on insurance
matters related to Windy Maintenance and he had nothing
to do with Duff himself regarding Windy Maintenance.
Leahy’s description of the supposed structure of Windy
Maintenance helped derail this investigation. Each of the
Rule 404(b) requirements were met. This testimony demon-
strated Leahy’s intent to protect Duff and his fraudulent
schemes, by showing his willingness to lie to investigators
on Duff’s behalf. Leahy’s actions took place at the same time
that the insurance fraud occurred and involved lies and
subterfuge to throw off investigators, just as in the insurance
fraud scheme. Moreover, the jury easily could have con-
cluded that Leahy lied to Hiegel, and this was not such
inflammatory evidence that the probative value was
outweighed by its small prejudicial effect. The district court,
therefore, did not abuse its discretion when it admitted this
evidence.
  Leahy also second-guesses the district court’s refusal
to admit certain pieces of evidence. Leahy wanted the
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                       41

district court to admit a letter from a USF&G investigator to
an FBI agent in which the investigator stated that she found
no premium fraud by Windy Labor. The district court
excluded the USF&G letter on hearsay grounds. The letter
constitutes hearsay, but Leahy argues that it qualifies for a
hearsay exception under Federal Rule of Evidence 804(b)(3).
Under Rule 804(b)(3), the letter may be admissible if: (1) the
declarant is unavailable; (2) the statement is against the
declarant’s penal interest; and (3) corroborating circum-
stances exist that bolster the statement’s trustworthiness.
Fed. R. Evid. 804(b)(3). Even assuming that the USF&G
investigator was unavailable, Leahy cannot satisfy the
second prong of this test. “A statement is against penal
interest if it subjects the declarant to criminal liability.”
United States v. Bonty, 383 F.3d 575, 579 (7th Cir. 2004). The
penal interest exception does not include statements that
could possibly subject the declarant to prosecution. See
United States v. Butler, 71 F.3d 243, 253 (7th Cir. 1995) (“The
hearsay exception does not provide that any statement
which ‘possibly could’ or ‘maybe might’ lead to criminal
liability is admissible”); see also Bonty, 383 F.3d at 579 (“It is
simply not enough that during the interview Bonty admit-
ted to some facts . . . that ‘possibly could’ lead to criminal
liability; to be inculpatory he must admit to criminal
behavior.”). Rather, the statement itself, taken as is, must
basically admit to criminal behavior. See Butler, 71 F.3d at
253. In this case, the USF&G letter does not inculpate the
author in any crime or subject her to liability, so the district
court properly deemed it hearsay.
  Moreover, Leahy believes the court abused its discretion
by excluding certain audits from evidence. These audits
were conducted by Travelers from 2001-2003, after the
discovery of the insurance fraud scheme. Leahy thinks that
they exculpate him because they show that Windy Labor
42                   Nos. 05-2639, 05-2652, 05-2692 & 06-1485

and Leahy & Associates were not responsible for any
misclassification or insurance fraud once the Windy Labor
schemers were removed. To be admissible, however, these
documents must be relevant. Fed. R. Evid. 401 (relevant
evidence is that “evidence having any tendency to make the
existence of any fact that is of consequence to the determina-
tion of the action more probable or less probable than it
would be without the evidence.”) Just because Leahy did
not continue with the fraud after the scheme had been
discovered has no bearing on whether he participated
before the fraud was out in the open. As such, the audits
were properly excluded on relevancy grounds.
   Leahy finally contends that he was denied his Sixth
Amendment right of cross-examination because the dis-
trict court would not allow him to use the USF&G letter
when questioning the government’s insurance experts.
While the Sixth Amendment guarantees the right to con-
front witnesses, trial judges have broad discretion to impose
reasonable limitations. See United States v. McLee, 436 F.3d
751, 761 (7th Cir. 2006). In this instance, the district court
used its power to limit a portion of an examination that
would rely on hearsay material of marginal relevance.
Again, we find no abuse of discretion.


                                H.
 Having dealt with Leahy’s complaints about the trial,9
we move to his sentencing and restitution objections.


9
  Leahy made one additional trial complaint, that the district
court erred when it denied his motion for severance. As he did
not renew this motion at the close of the evidence, however, it
was waived. See United States v. Rollins, 301 F.3d 511, 518 (7th Cir.
2002).
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                     43

First, Leahy argues that the district court should not
have applied U.S.S.G. § 3B1.1, an enhancement for being
an organizer or leader in the insurance fraud. This is a
factual determination and, as such, we review for clear
error. See United States v. Wasz, 450 F.3d 720, 730 (7th Cir.
2006). Leahy specifically asserts that he did not control
Wisniewski or give orders to anyone to further the
fraud. This, however, was not required. “Organizers ‘do not
necessarily control anyone but nonetheless influence the
criminal activity by coordinating its members.’ ” United
States v. Skoczen, 405 F.3d 537, 550 (7th Cir. 2005) (quoting
United States v. Reneslacis, 349 F.3d 412, 417 (7th Cir. 2003)).
When the insurance scheme was faltering, Duff sent his
underlings to Leahy, not Wisniewski, for the solution.
Moreover, Leahy provided cover for the insurance fraud
through his brokerage firm and employees. Leahy, there-
fore, marshaled the people and instruments for this offense,
which is sufficient. See id. While there is not an abundance
of information supporting this finding, we do not believe
that the district court clearly erred in adding this upward
enhancement.
  Leahy’s next challenge is to the district court’s calcula-
tion of the offense level, which hinged on the district court’s
loss determination. Leahy contends that the district court
should not have computed the amount of loss for the entire
period from 1989 through the ending of the scheme. The
definition of loss is a question of law subject to de novo
review, while the amount of loss is a finding of fact re-
viewed for clear error. See Vivit, 214 F.3d at 914. According
to U.S.S.G. § 1B1.3, application note 2, a defendant cannot be
held accountable for acts that occur before he engaged in
criminal conduct. See Nichols v. United States, 75 F.3d 1137,
1143-44 (7th Cir. 1996).
44                  Nos. 05-2639, 05-2652, 05-2692 & 06-1485

  The district court erred in calculating loss based on the
entirety of the scheme. While Leahy was the insurance
broker at the very start of Windy Labor, no evidence
indicated that either Leahy or Leahy & Associates became
involved with the insurance scheme until 1995. Apparently
acting alone, Windy Labor changed the classifications,
thus reducing premiums. The government and district court
assumed that Leahy would have known about the fraud
because of the changes in the payroll classifications in the
policies and his business and social interactions with Duff
and his family. Before 1995, however, the policy was
essentially self-renewing with no input from Leahy and his
company. Moreover, by the time that the fraud would have
been most obvious with high modifiers and drastically
different payroll, the file had been transferred to
Wisniewski, whom the district court found was not respon-
sible for any pre-1995 losses. The district court assumed,
unsupported by evidence, that Leahy actually was a
participant in the fraud before 1995. This does not suffice.
See McIntosh, 198 F.3d at 999 (“We will reverse [a factual]
finding only if the record contains no evidence providing a
foundation for it.”).
   This conclusion also affects our last inquiry, the restitution
amount. Leahy challenges both the method used to calculate
the restitution amount, as well as the period covered. The
first is rather easily disposed of. As stated previously, we
review the amount of restitution for abuse of discretion. See
Brierton, 165 F.3d at 1139. The district court concluded the
appropriate amount of restitution to the Insurance Council
was $1.09 million, the total amount of the underpaid
premiums. Leahy argues that the Insurance Council does
not merit restitution because it received more in premiums
than it paid out in claims, so it sustained no loss for restitu-
tion purposes. We disagree. The insurance companies were
Nos. 05-2639, 05-2652, 05-2692 & 06-1485                    45

entitled to the benefit of their bargains—the amount of
money they would have charged to insure the actual risk
that Windy Labor presented. See United States v. Garavaglia,
5 F. Supp. 2d 511, 520, 522 (E.D. Mich. 1998), aff’d, 178 F.3d
1297 (6th Cir. 1999). Otherwise, Windy Labor would obtain
a windfall through its fraud, receiving coverage for greater
risks than the amount of premiums merited. The district
court, therefore, did not err in the restitution order when it
calculated the entire amount Windy Labor should have paid
and subtracted what it did pay. The remainder returns the
insurance companies to the positions they would have
occupied absent the fraud. However, the restitution amount
imposed on Leahy must be reduced consistent with our
earlier finding regarding the length of his criminal participa-
tion.


                             III.
  Duff used his associates to satiate his greed, taking
advantage of a city’s attempt to help minorities and
women and abusing the trust of his insurers. The govern-
ment properly indicted Duff, Stratton, Dolan, and Leahy for
various crimes, including wire and mail fraud, and the
district court, by and large, conducted the trial of these
complex and extensive matters admirably. We AFFIRM the
convictions of all the defendants and the district court’s
evidentiary rulings. We REVERSE the district court’s con-
clusion regarding the extent of Leahy’s involvement
with the insurance fraud and REMAND for re-calculation
of the offense level and restitution amount consistent
with this opinion.
46              Nos. 05-2639, 05-2652, 05-2692 & 06-1485

A true Copy:
       Teste:

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




                 USCA-02-C-0072—10-4-06
