2. Background and Procedural History
The fraudulent funeral-home operation
Hess operated Sunset Mesa Funeral Directors and a nonprofit entity doing business as Donor Services. Although Donor Services purported to assist people unable to afford funeral and cremation services, its primary purpose was to market human bodies and body parts. Koch assisted with dismemberment and preparation of remains and participated in meetings with families.
The fraud took several forms. Some families never authorized any donation. Others expressly declined donation, yet their relatives’ remains were still sold. Still others consented to limited donations after misleading representations, only for the defendants to sell substantially more than authorized, sometimes the entire body. Families frequently received cremated remains falsely represented as those of their relatives and paid for cremations that never occurred.
The operation’s records documented transactions involving 811 individuals. Investigators concluded that remains from 560 decedents were almost certainly obtained and sold fraudulently, while identifying informed consent for only 42. The defendants also misrepresented the legitimacy of donations to purchasers and, in dozens of instances, falsified disease-testing information.
Convictions and the first appeal
Each defendant pleaded guilty to one count of mail fraud and aiding and abetting under 18 U.S.C. §§ 1341 and 2. Their original sentences included both the initial vulnerable-victim enhancement and the additional enhancement for a large number of vulnerable victims.
In United States v. Hess, 106 F.4th 1011 (10th Cir. 2024), the court identified errors in the loss calculations and Koch’s sophisticated-means enhancement. It also rejected the original reasoning supporting the large-number enhancement: deceased persons could not qualify as vulnerable victims on the theory used, and grief alone did not establish that every bereaved family member was unusually susceptible to this fraud.
The remand permitted particularized findings explaining how individual vulnerabilities enabled or facilitated the scheme.
Resentencing
On remand, the government submitted additional victim statements and testimony from fraud expert Dr. Doug Shadel. The district court identified twenty-one particular victims whose circumstances, it found, were connected to the defendants’ ability to perpetrate the fraud. It then recalculated the advisory ranges but reimposed the original prison terms.
| Defendant |
Original advisory range |
Resentencing advisory range |
Sentence affirmed |
| Megan Hess |
151–188 months |
121–151 months |
240 months, the statutory maximum |
| Shirley Koch |
121–151 months |
78–97 months |
180 months |
The sentencing and later restitution judgments generated four appeals, consolidated for disposition. The appellate issues addressed in the opinion concerned the prison sentences, not the merits of the restitution calculation.
4. Legal Reasoning
A. Vulnerability must relate to the particular offense
Section 3A1.1(b) establishes a two-stage adjustment. Subsection (b)(1) adds two levels when the defendant knew or should have known that a victim was vulnerable. If that adjustment applies and the offense involved a large number of vulnerable victims, subsection (b)(2) adds another two levels. Neither defendant challenged the initial adjustment in this appeal.
The commentary defines vulnerability through unusual susceptibility arising from age, physical or mental condition, or other circumstances. But general disadvantage is insufficient. The vulnerability must have a meaningful connection—or nexus—to the particular criminal conduct.
Hess proposed a narrower rule: a victim should qualify only if the vulnerability reduced the victim’s ability to detect or thwart the fraud. The court rejected that formulation. The commentary’s example of an ineffective cancer cure illustrates why. A cancer patient may be particularly susceptible to that fraud because of the need for treatment, not because the patient has an unusually poor ability to recognize deception.
The relevant inquiry therefore concerns exploitation of circumstances that facilitate the offense, rather than exclusively the victim’s capacity to discover wrongdoing.
B. The fraud’s acquisition stage supplied the necessary connection
Hess argued that unsupervised custody of the bodies—not the families’ vulnerabilities—enabled the fraud. The court’s answer was that vulnerability explained how the defendants obtained that custody in the first place.
The scheme depended on attracting families and securing control of remains. Revenue from unlawful sales allowed the defendants to advertise unusually inexpensive services. For families facing severe financial constraints, those offers materially influenced the choice of funeral home or the decision to authorize a limited donation. Obtaining custody through those promises was part of the fraudulent process, not merely incidental background.
Several examples demonstrated the direct connection:
- M.C.-P. had serious health problems and little income. She changed her intended arrangements from embalming to cheaper cremation after the defendants offered to help. They then sold her grandmother’s body.
- J.D. could not afford immediate cremation costs. Koch offered free cremation in exchange for a brain donation supposedly supporting Alzheimer’s research. The defendants instead sold his grandfather’s entire body.
- T.F. faced substantial expenses from her husband’s cancer treatment and selected Sunset Mesa rather than her local funeral home because of the lower price.
- N.H. needed to borrow money for funeral expenses and selected the defendants because of their prices and assurances of respectful treatment.
These findings distinguished the case from one in which a vulnerability merely creates an opportunity to meet a victim before an unrelated fraud occurs.
C. Shared vulnerabilities do not necessarily mean impermissible class reasoning
The original sentencing had treated grief as a sufficient basis for vulnerability across the affected families. On remand, the district court instead examined specific victim statements and circumstances.
That difference was decisive. A court may not simply assume that all poor people, older people, or bereaved people are unusually vulnerable to a particular crime. It may, however, find that multiple victims share a relevant vulnerability when evidence establishes how that vulnerability operated for each person.
The expert testimony did not replace this individualized inquiry. Although Dr. Shadel discussed eleven victims, the district court concluded that only four of those presentations established the connection required by the remand. It relied on other victim statements for additional findings.
The appellate court sustained findings concerning five victims whose vulnerability determinations Hess did not contest—C.A.H., D.S., L.A.P., K.R., and C.B.—and ten additional victims whose financial circumstances supported the enhancement: M.B., D.Mc., J.D., D.W., K.B., T.F., A.S.J., M.C.-P., R.B., and N.H.
The court did not decide whether the remaining six people identified by the district court also qualified. Its holding therefore rests on fifteen supported findings, not appellate approval of every finding made below.
D. Fifteen victims suffice, but the minimum remains unresolved
The Guidelines do not provide a single numerical definition of a “large number” for this enhancement. The court used an offense-sensitive approach, considering the treatment of victim numbers in the applicable fraud guideline and prior decisions.
Because an earlier fraud case upheld the enhancement for sixteen particularly vulnerable victims, the court concluded that fifteen were sufficient here. It expressly declined to decide whether five or ten would also suffice.
The distinction matters: the decision establishes a sufficient number in the fraud context, not a mandatory fifteen-victim threshold for every future case.
E. Relevant conduct, rather than personal contact, governs Koch’s exposure
The commentary extends the vulnerable-victim adjustment to victims of conduct attributable to a defendant under § 1B1.3. That provision includes acts the defendant committed, aided, or abetted.
Accordingly, Koch could not limit the calculation to victims she personally met. Her relevant conduct included the fraudulent conduct she aided and abetted, including Hess’s actions within the scheme.
The court also distinguished the two subsections’ language. The initial enhancement requires actual or constructive knowledge of at least one victim’s vulnerability. The additional enhancement asks whether the offense involved a large number of vulnerable victims and contains no separate scienter requirement concerning each additional victim.
This is not unlimited responsibility for another person’s wrongdoing: the conduct must still be attributable to the defendant under the relevant-conduct rules. Within that boundary, however, personal interaction is unnecessary.
F. The government’s position did not control the sentencing court
Because of its plea agreement with Koch, the government opposed applying the additional enhancement to her at resentencing and requested 78 months. The district court was not bound by the government’s legal interpretation or recommendation.
Nor was the government barred from defending the resulting judgment on appeal. An appellee generally may support affirmance on grounds supported by the record, even if it took a different position below.
Koch also suggested that the government’s presentation of evidence might have breached the plea agreement. The court treated that suggestion as waived because she did not develop the argument. It therefore did not decide whether a breach occurred. The ruling that legal concessions do not bind judges should not be confused with a ruling releasing prosecutors from plea-agreement obligations.
G. Rehabilitation did not establish reversible plain error
Hess submitted evidence of educational work, assistance to fellow prisoners, completed courses, supportive letters, and other constructive activities. The district court acknowledged her conduct but described compliance with prison expectations as both commendable and unremarkable, noting the availability of good-time credit.
The appellate court did not definitively decide whether that treatment was erroneous. Instead, it assumed error and addressed the demanding standard applicable because Hess had not objected at resentencing.
First, the alleged error was not obvious under settled law. Pepper v. United States permits consideration of rehabilitation and allows it to support a reduced sentence, but does not require a reduction. Nor, the court reasoned, does it make the availability of good-time credit categorically irrelevant to the weight assigned to rehabilitation.
Second, Hess did not show prejudice. The district court expressly regarded the offense’s circumstances as outweighing the mitigating evidence. Its findings concerning her continuing minimization of harm and lack of remorse further undermined the likelihood of a different outcome.
The resulting holding is limited: this was a failure to establish reversible plain error, not a general endorsement of dismissing rehabilitation evidence without meaningful consideration.
H. Exceptional nonfinancial harm justified Koch’s upward variance
The district court considered Koch’s age, health conditions, limited scored criminal history, and lesser culpability. It nevertheless found that the advisory range substantially understated the offense’s seriousness.
The conduct involved more than financial loss. Families entrusted loved ones’ remains for respectful treatment, only to discover unauthorized sales and dismemberment. The court emphasized enduring emotional injury, betrayal of trust, prolonged misconduct, and virtually nonexistent remorse. It also noted Koch’s prior fraud-related felony, although that conviction generated no criminal-history points.
The appellate court declined to reweigh those considerations. An outside-Guidelines sentence is not presumed unreasonable, and the district court explained both the need for a substantial increase and its decision to impose a sentence sixty months shorter than Hess’s.
6. Impact and Limits
Financial hardship becomes a concrete, offense-linked basis for vulnerability. Future fraud cases may draw on this reasoning when defendants exploit an urgent need for essential services. But poverty alone remains insufficient: evidence must show how the particular circumstances facilitated the particular scheme.
The decision broadens the understanding of facilitation without eliminating the nexus requirement. Vulnerability may matter at the stage when defendants secure a victim’s business, consent, or property. It need not manifest as an inability to detect deception after the defendants obtain control.
Individualized findings remain indispensable. Victim statements identifying financial constraints, alternatives considered, and responses to specific offers will be especially important. Expert evidence about general risk factors can assist, but cannot substitute for the required connection.
Fifteen is sufficient, not necessarily necessary. The opinion leaves lower numbers unresolved and preserves an offense-sensitive approach.
Accomplices cannot rely solely on limited personal contact. The relevant-conduct rules may encompass victims reached through conduct they aided and abetted, once the enhancement’s prerequisites are satisfied.
Large variances require case-specific justification. This decision does not make emotional harm or lack of remorse automatic grounds for comparable sentences. Its affirmance rests on unusually severe facts and a detailed explanation of why the advisory ranges were inadequate.
Rehabilitation claims should be preserved. A timely objection to a court’s treatment of rehabilitation evidence can be crucial. Hess’s failure to object required her to establish both obvious error and probable effect on the outcome, hurdles she could not clear.