Fraud Sentencing: Exploited Financial Vulnerability Can Support the Large-Number-of-Vulnerable-Victims Enhancement

1. Introduction

This published decision clarifies when financial hardship makes a fraud victim “unusually vulnerable” under the federal Sentencing Guidelines. The Tenth Circuit holds that vulnerability need not diminish a victim’s ability to detect or prevent deception. Instead, the necessary connection exists when an offender directly exploits an individual vulnerability to facilitate the particular fraud. Here, promises of inexpensive or free cremation services induced financially distressed people to entrust relatives’ remains to a funeral home that secretly sold bodies and body parts.

The court also establishes that fifteen particularly vulnerable victims suffice for the additional enhancement under U.S.S.G. § 3A1.1(b)(2) in the mail-fraud circumstances presented. Once the initial vulnerable-victim enhancement applies, the additional enhancement reaches qualifying victims of conduct the defendant aided and abetted; personal contact with every vulnerable victim is unnecessary.

The consolidated appeals arose from the resentencing of funeral-home operator Megan Hess and her mother, Shirley Koch. Both challenged the vulnerable-victim calculation. Hess additionally challenged the treatment of her rehabilitation in prison, while Koch argued that her fifteen-year sentence was substantively unreasonable. The court affirmed both sentences.

2. Background and Procedural History

The fraudulent funeral and body-broker businesses

Hess operated Sunset Mesa Funeral Directors and a nonprofit organization doing business as Donor Services. Although the nonprofit ostensibly assisted people who could not afford funeral services, its principal activity was selling human remains to research, educational, plastination, and body-broker businesses. Koch assisted with dismemberment, preparation of remains, and dealings with families.

The scheme took several forms. Some families authorized no donations; others expressly refused. Some consented to limited donations after receiving misleading explanations, only for the defendants to sell substantially more than authorized. Families were charged for cremations that never occurred and sometimes received cremated remains falsely represented as belonging to their relatives.

The records documented sales involving 811 decedents. Investigators concluded that remains from 560 were almost certainly obtained and sold fraudulently; only 42 cases were identified as involving informed consent. The defendants also misrepresented the legitimacy of donations to purchasers and, in numerous instances, falsified disease-test results. Income from these sales helped Sunset Mesa advertise exceptionally low cremation prices, attracting further business and supplying additional bodies.

Convictions and the first sentencing appeal

Each defendant pleaded guilty to one count of mail fraud and aiding and abetting. Hess’s count concerned a shipment involving twelve bodies; Koch’s concerned nine. The government dismissed the remaining charges. Koch’s agreement also required the government to recommend a sentence within an anticipated range of 63 to 78 months.

At the original sentencing, the district court applied both parts of § 3A1.1(b): an initial two-level increase for knowing, or having reason to know, that a victim was vulnerable, and a further two-level increase because the offense involved a large number of vulnerable victims. The court treated deceased individuals and their grieving relatives as vulnerable groups. It ultimately imposed upward variances: 240 months for Hess and 180 months for Koch.

In United States v. Hess, 106 F.4th 1011 (10th Cir. 2024), the Tenth Circuit rejected that vulnerability analysis. Individuals already deceased when the fraud occurred could not qualify on the theory advanced, and grief alone did not establish that surviving customers were unusually susceptible to this fraud. The district court needed individualized findings connecting vulnerability to the defendants’ conduct. The first appeal also identified loss-calculation errors and reversed Koch’s sophisticated-means enhancement.

Resentencing on an expanded evidentiary record

On remand, the government supplied additional victim statements and testimony from fraud expert Dr. Doug Shadel. He explained that multiple stressful life events—including bereavement, illness, caregiving, debt, and reduced income—can increase susceptibility to fraud. The district court did not simply accept every proposed example: it found that only four of the eleven victims specifically discussed by the expert satisfied the required connection, and it examined additional victim statements.

The district court ultimately identified twenty-one particular victims whose circumstances, it concluded, facilitated the fraud. Its findings focused on financially constrained families and people whose relatives were terminally ill or receiving hospice care. After correcting other Guidelines calculations, it imposed the same prison terms as before.

3. Summary of the Opinion

• Individual vulnerability: The record established the required connection between the fraud and the circumstances of fifteen victims. The court did not decide whether the remaining six identified by the district court also qualified.
• No detection-or-prevention prerequisite: Section 3A1.1 does not require proof that vulnerable victims were less capable than others of detecting or thwarting the scheme.
• A sufficient number: Fifteen vulnerable victims constituted a “large number” for the fraud offense before the court. The court did not establish a universal numerical minimum.
• Aiding and abetting: Koch’s lack of personal interaction with many victims did not exclude them from the enhancement because her relevant conduct included the fraud she aided and abetted.
• Rehabilitation: Hess failed to establish reversible plain error in the district court’s treatment of her post-sentencing rehabilitation.
• Sentence length: Koch’s substantial upward variance remained within the district court’s sentencing discretion given the extraordinary harm, her participation, and the findings concerning remorse.

4. Analysis: Legal Reasoning and Precedents Cited

A. Standards of review and the interpretive framework

United States v. Rocha, 145 F.4th 1247 (10th Cir. 2025), supplies the general framework: sentences are reviewed for reasonableness under a deferential abuse-of-discretion standard, legal interpretations of the Guidelines receive de novo review, and factual findings receive clear-error review. An erroneous legal premise or clearly erroneous factual premise can itself constitute an abuse of discretion.

United States v. Tony, 121 F.4th 56 (10th Cir. 2024), directs courts interpreting the Guidelines to identify the Sentencing Commission’s intent through the provision’s text and explanatory commentary. As stated in that precedent, commentary governs unless unconstitutional, contrary to federal statute, plainly erroneous, or inconsistent with the provision it interprets. This made Application Note 2 to § 3A1.1 central to the analysis.

Under United States v. Sumka, 81 F.4th 1153 (10th Cir. 2023), identifying an unusually vulnerable victim ordinarily involves factual review, while interpreting the Guidelines or assessing legal sufficiency calls for de novo review. The panel did not resolve the parties’ disagreement over the precise standard applicable here: it concluded that the enhancement survived either standard.

B. The essential rule: vulnerability must facilitate the particular offense

Application Note 2 defines a vulnerable victim as a victim of the offense or relevant conduct who is unusually vulnerable because of age, physical or mental condition, or another circumstance making that person particularly susceptible to the criminal conduct. The inquiry is therefore relational: a characteristic must matter to the crime actually committed, rather than merely describe someone who is generally disadvantaged.

The commentary illustrates this distinction through an ineffective cancer cure. Cancer patients are particularly susceptible to fraud exploiting their need for treatment. By contrast, the fact that a victim of broadly marketed fraudulent securities happens to have an unrelated vulnerability does not itself justify the enhancement.

The controlling starting point was United States v. Hess. That decision required a nexus between a victim’s vulnerability and the defendants’ fraud, not simply proof of bereavement. The present opinion preserves that requirement while finding that the expanded record now satisfied it. The new decision thus concerns a materially different evidentiary showing, not abandonment of the earlier ruling.

United States v. Proffit: incidental access versus exploitation of the relevant need

United States v. Proffit, 304 F.3d 1001 (10th Cir. 2002), provides the central comparison. A rancher diagnosed with cancer advertised his ranch for sale. The defendant approached him as a potential buyer but ultimately induced him to invest $50,000 in a fraudulent cattle-futures venture. The court rejected the vulnerable-victim enhancement because the illness explained the initial encounter, not the investment decision. The rancher invested for the ordinary attraction of a quick financial return.

Crucially, United States v. Proffit suggested that the result might differ if the defendant had exploited the illness-driven decision to sell the ranch and fraudulently obtained the ranch itself. That observation distinguished a vulnerability merely opening an incidental opportunity from a vulnerability directly connected to the transaction through which the fraud operates.

Here, financial distress was connected to the very service falsely offered. The defendants promised affordable cremations to people struggling to pay for them, thereby obtaining custody of the bodies they intended to sell. The vulnerability did not simply introduce the parties to an unrelated fraud; it helped produce the transfer essential to this scheme.

C. Why reduced ability to detect or thwart fraud is unnecessary

Hess relied on United States v. Fosher, 124 F.3d 52 (1st Cir. 1997), for language focusing on whether a victim was less likely to detect or thwart a crime. The panel declined to adopt that formulation as the governing Tenth Circuit requirement. It was neither compelled by the Guidelines’ text nor established by the circuit’s precedents.

The cancer-cure example again proved decisive. A person with cancer need not have diminished powers of investigation or judgment to be especially susceptible to promises addressing that illness. Likewise, someone who cannot afford ordinary funeral charges may be particularly susceptible to an offer of free cremation without being less intelligent, attentive, or skeptical than another customer.

Nor did United States v. Proffit support Hess’s proposed restriction. The rancher’s ability to detect fraud would not necessarily differ between an investment scheme and a fraudulent ranch purchase. What would differ is the connection between his illness and the defendant’s chosen transaction.

The resulting distinction is important: the enhancement protects against exploitation of a particular need or condition, not only exploitation of diminished capacity to recognize wrongdoing.

D. Individualized findings, shared characteristics, and impermissible presumptions

The court carefully distinguished evidence-based findings about several similarly situated victims from unsupported assumptions about an entire class.

United States v. Tissnolthtos and United States v. Drapeau

In United States v. Tissnolthtos, 115 F.3d 759 (10th Cir. 1997), the court rejected treating a seventy-one-year-old assault victim as unusually vulnerable based on age alone. It contrasted that situation with United States v. Drapeau, 110 F.3d 618 (8th Cir. 1997), which recognized the obvious vulnerability of a one-year-old assault victim lacking the physical ability to resist and the verbal or mental ability to report the attack.

These precedents establish both the general need for individualized findings and a limited qualification: a class characteristic can sometimes support an overwhelmingly strong inference of unusual vulnerability. Ordinary assumptions about older people or grieving families do not automatically meet that standard.

United States v. Creech and United States v. Brunson

United States v. Creech, 913 F.2d 780 (10th Cir. 1990), rejected the assumption that newlyweds were unusually vulnerable to threats against their spouses. The record did not establish that recently married people were more susceptible to such threats than other married people.

United States v. Brunson, 54 F.3d 673 (10th Cir. 1995), similarly rejected an enhancement based on a defendant’s belief that foreign companies were easier to deceive and the fact that his fraud succeeded. Subjective expectations about a group and successful victimization did not establish objective unusual vulnerability. The court also concluded that choosing foreign corporate victims was not the kind of heightened blameworthiness contemplated by the enhancement.

Those decisions supported the need for evidence here, but not Hess’s argument that the district court had repeated its original error. On remand, the court identified individual circumstances and explained their operational importance to the fraud. Shared financial hardship did not invalidate those findings.

Concrete findings connecting hardship to the scheme

The appellate court highlighted several examples:

• M.C.-P. had major health problems and little income. The defendants persuaded her to substitute cheaper cremation for planned embalming, obtaining the access necessary to sell her grandmother’s body.
• J.D. could not immediately afford his grandfather’s cremation. A promised free cremation in exchange for a brain donation induced his agreement, but the entire body was sold.
• K.B. faced financial and caregiving burdens and received a purported special price because her husband was a veteran.
• N.H. was elderly, disabled, indebted, and dependent on borrowed money for funeral expenses. The low-price offer and assurances of care drew her to Sunset Mesa.
• T.F. had incurred substantial expenses during her husband’s cancer treatment and selected Sunset Mesa instead of her local funeral home because it was cheaper.

The panel also upheld findings concerning other financially constrained victims and five victims whose vulnerability related to terminal illness or hospice circumstances. Hess did not contest the latter five findings on appeal. In total, the appellate court upheld fifteen individual determinations, without endorsing every determination made below.

United States v. Scott, United States v. Castaneda, and United States v. Caballero

United States v. Scott, 529 F.3d 1290 (10th Cir. 2008), quoting United States v. Castaneda, 239 F.3d 978 (9th Cir. 2001), explains the enhancement’s rationale: exploiting a particular victim or group can make conduct more blameworthy than comparable offending. United States v. Scott also upheld an enhancement where a trafficking offender exploited a minor’s small stature and unusual naivety.

United States v. Caballero, 277 F.3d 1235 (10th Cir. 2002), upheld an enhancement where immigration fraud exploited language barriers, unfamiliarity with American law, cultural circumstances, and immigration status. It demonstrated that multiple victims may share a vulnerability without the court engaging in impermissible categorical reasoning, provided the record explains how that characteristic enabled the particular crime.

These authorities reinforced the conclusion that exploiting impoverished families’ immediate need for funeral services justified enhanced punishment. Heightened blameworthiness supported the result, but did not replace the necessary evidentiary nexus.

E. Fifteen victims satisfy the “large number” requirement here

United States v. Kaufman, 546 F.3d 1242 (10th Cir. 2008), concerned exploitation of mentally ill residents in an unlicensed group home, including forced labor and involuntary servitude. The district court had declined the additional enhancement because the Guidelines did not clearly define “large number.” The Tenth Circuit rejected that approach and used the offense-specific involuntary-servitude guideline to conclude that ten victims constituted a large number in that context.

United States v. Anderson, 349 F.3d 568 (8th Cir. 2003), appeared through United States v. Kaufman as authority recognizing that the phrase was “largely uninterpreted.” Its role was to identify the interpretive difficulty, not to supply a controlling numerical rule.

The present panel followed United States v. Kaufman’s contextual method rather than converting its ten-victim conclusion into a universal threshold. For fraud, the court considered § 2B1.1(b)(2), which contains victim-related adjustments referring to five, ten, and twenty-five victims. More directly, United States v. Caballero had sustained the vulnerable-victim enhancement in a fraud case involving sixteen particularly vulnerable victims.

Against that background, fifteen qualified here. The holding remains deliberately narrow: it does not decide whether five or ten would suffice for fraud, and it does not establish fifteen as the minimum for every fraud case. Nor does it make the district court’s twenty-one-victim finding the operative appellate count.

F. Koch’s responsibility extends to qualifying conduct she aided and abetted

Koch argued that she could not be subject to the additional enhancement without meaningful personal contact with most vulnerable victims. The court rejected that position through the structure of the Guidelines:

1. Application Note 2 incorporates victims of conduct for which the defendant is accountable under § 1B1.3.
2. Section 1B1.3(a)(1)(A) includes acts the defendant committed, aided, abetted, induced, or otherwise caused in the specified relationship to the offense.
3. Section 3A1.1(b)(1) requires knowledge or constructive knowledge of at least one victim’s vulnerability.
4. Once that initial enhancement applies, § 3A1.1(b)(2) asks whether the offense involved a large number of vulnerable victims and adds no separate knowledge requirement concerning every victim.

Neither defendant disputed the initial enhancement. Koch’s additional enhancement therefore turned on qualifying relevant conduct, not a victim-by-victim showing of personal interaction. Her aiding-and-abetting responsibility encompassed Hess’s conduct in furtherance of their scheme.

United States v. Boll, 3 F.4th 1099 (8th Cir. 2021), did not support a narrower result. Its contextual approach considered the offense of conviction and all relevant conduct, asking whether the number of vulnerable victims exceeded the number typical of offenses of that kind. “Context” referred to the type of offense, not merely the defendant’s personal role.

The holding is not unlimited responsibility for another person’s crimes: the conduct must remain attributable to the defendant under the relevant-conduct rules. Here, aiding and abetting supplied that connection.

G. Plea recommendations, legal concessions, and appellate preservation

The government recommended against applying the additional enhancement to Koch because it considered itself bound by its plea agreement. The district court was nevertheless responsible for independently determining the correct Guidelines calculation.

United States v. Ronquillo, 94 F.4th 1169 (10th Cir. 2024), illustrates the governing principle that parties cannot bind a court through stipulations on legal questions. There, the court independently assessed a warrant’s scope despite a government concession. Likewise, the government’s sentencing position here did not determine the legal applicability of § 3A1.1(b)(2).

Richison v. Ernest Grp., 634 F.3d 1123 (10th Cir. 2011), distinguishes arguments supporting affirmance from arguments seeking reversal. Together with the earlier United States v. Hess decision, it supported allowing the government, as appellee, to defend the judgment on a record-supported ground despite its contrary position below.

Koch also suggested that the government’s presentation of vulnerability evidence might have breached the plea agreement, but she did not develop that argument. Under LaFevers v. Gibson, 182 F.3d 705 (10th Cir. 1999), perfunctory references without developed argument are waived. Consequently, the court did not decide whether a breach occurred. Its ruling on appellate advocacy should not be confused with a merits determination that every aspect of the government’s conduct complied with the agreement.

H. Rehabilitation: permission to consider does not require a sentence reduction

Hess submitted evidence of educational work, courses, supportive letters, assistance to other prisoners, and other rehabilitative activities. The district court described her conduct as commendable but also expected of prisoners, referred to good-time credits, and found the offense’s gravity outweighed mitigation. Hess did not contemporaneously object to that treatment.

United States v. Kee, 129 F.4th 1249 (10th Cir. 2025), supplied the four-part plain-error test: error, plainness, an effect on substantial rights, and a serious effect on the fairness, integrity, or public reputation of judicial proceedings. Hess bore the burden on each requirement.

Her principal authority, Pepper v. United States, 562 U.S. 476 (2011), holds that resentencing courts may consider post-sentencing rehabilitation and may grant a downward variance on that basis in appropriate cases. It rejected categorical restrictions on considering such evidence and explained that sentence reductions and prison good-time credits serve different penological purposes.

But Pepper v. United States does not require a reduction whenever rehabilitation is shown. The panel also concluded that it does not clearly forbid considering the availability of good-time credit when deciding how much weight rehabilitation deserves.

Applying United States v. Booker, 63 F.4th 1254 (10th Cir. 2023), the court assumed, without deciding, that an error occurred but found none obvious under well-settled law. Hess also failed to show a reasonable probability of a lower sentence absent the alleged error. The district court had expressly found that the extraordinary offense circumstances outweighed mitigation.

This is therefore a limited plain-error holding, not blanket approval of dismissing rehabilitation. The critical distinction remains between legally excluding rehabilitation and considering it but assigning it little weight.

I. Koch’s upward variance was substantively reasonable

Koch emphasized her age of seventy-one, health problems, limited criminal history, and lesser role. She characterized the fifteen-year term as effectively a life sentence for an essentially white-collar offense. The panel concluded that the district court had considered those arguments but permissibly found them outweighed.

United States v. Peña, 963 F.3d 1016 (10th Cir. 2020), and United States v. Holt, 161 F.4th 1253 (10th Cir. 2025), describe the narrow appellate inquiry: whether the sentence was arbitrary, capricious, whimsical, manifestly unreasonable, or outside the bounds of permissible choice. Under United States v. Rocha, a sentence outside the Guidelines range is not presumed unreasonable; appellate courts defer to a properly supported assessment that the § 3553(a) factors justify the variance.

The district court explained that the monetary-loss framework did not adequately capture the destruction of families’ confidence about their relatives’ final disposition, the desecration of remains, or the lasting emotional damage. It also considered Koch’s fraud-related prior conviction and lack of remorse. Her lesser culpability was reflected in receiving sixty months less than Hess.

The panel supported this reasoning with several variance precedents:

• United States v. Doty, 150 F.4th 1351 (10th Cir. 2025), upheld an increase from 33–41 months to 96 months because the offense was atypical and extraordinarily harmful.
• United States v. Rocha upheld an increase from 27–33 months to 60 months where extraordinary recklessness was inadequately captured by the range.
• United States v. Lawless, 979 F.3d 849 (10th Cir. 2020), upheld an increase from 60 months to 144 months for arson far outside the ordinary case and emphasized that appellate courts do not reweigh the sentencing factors.
• United States v. Walker, 74 F.4th 1163 (10th Cir. 2023), upheld an increase from 84–105 months to 300 months based partly on severe physical and psychological harm.
• United States v. Vazquez-Garcia, 130 F.4th 891 (10th Cir. 2025), supported treating lack of remorse as one justification for an upward variance.

These decisions did not establish a numerical formula authorizing Koch’s sentence. They demonstrated that unusually serious harm and other individualized considerations can support substantial variances. Because the district court explained its assessment, the appeal presented an impermissible request to rebalance the factors rather than a demonstrated abuse of discretion.

5. Potential Impact and Limits

Financial hardship can matter without cognitive impairment

The opinion confirms that unusual susceptibility includes exploitable economic need. Future fraud cases involving essential services may invoke this reasoning where evidence connects an individual’s constrained circumstances to the transaction used to perpetrate the fraud. Poverty alone, however, does not automatically establish vulnerability, and an ordinary discount offered to the general public is not enough by itself.

Victim-specific evidence remains indispensable

General expert testimony about stress and fraud susceptibility can help explain the evidence, but it does not replace individualized findings. The decisive showing here combined personal circumstances, the defendants’ offers and representations, and the resulting access to bodies.

The numerical holding is useful but narrow

Fifteen qualifying victims are sufficient in this fraud setting. Lower numbers remain unresolved, and offense-specific context continues to matter. Practitioners should resist treating either this decision or the ten-victim discussion in United States v. Kaufman as a universal threshold.

Participants cannot restrict the count to customers they personally handled

Where the initial knowledge-based enhancement is established, an aider and abettor cannot defeat the additional enhancement merely by showing that another participant dealt with most victims. Attribution still depends on the Guidelines’ relevant-conduct requirements.

Nonfinancial harm can justify substantial sentencing departures from the advisory range

The decision reinforces the significance of emotional injury and abuse of trust when ordinary fraud calculations understate an offense’s seriousness. It does not make the Guidelines irrelevant: the court must first calculate them correctly and then explain why the statutory sentencing factors justify a different sentence.

Preservation can determine the outcome of rehabilitation challenges

The distinction between ordinary review and plain-error review was decisive for Hess. A contemporaneous objection can require direct consideration of whether a court improperly excluded mitigation; without one, an appellant must also establish obviousness and probable effect on the outcome.

6. Complex Concepts Simplified

Vulnerable-victim enhancement

An increase in the Guidelines offense level when the defendant knew or should have known that a victim was unusually susceptible to the crime. A further increase applies when the offense involves a large number of such victims.

Nexus

The necessary connection between the vulnerability and the offense. Here, inability to afford ordinary funeral services made particular customers especially susceptible to the offers used to obtain bodies.

Particularized findings

Evidence-based explanations about identified victims, rather than assumptions that everyone who is elderly, poor, or grieving is unusually vulnerable.

Scienter

A required state of knowledge. The initial enhancement requires actual or constructive knowledge of vulnerability; the additional large-number enhancement imposes no separate requirement to know every victim’s vulnerability.

Relevant conduct

Conduct considered in sentencing under the Guidelines, including qualifying acts a defendant aided or abetted, not merely acts personally performed.

Upward variance

A sentence above the correctly calculated advisory Guidelines range, justified by the statutory sentencing factors rather than a Guidelines adjustment.

Plain error

A demanding standard for an objection not properly raised below. A possible mistake is insufficient; the appellant must also establish that it was clear, consequential, and sufficiently damaging to judicial fairness.

Substantive reasonableness

Whether the sentence’s length is permissible in light of the case and the statutory sentencing purposes—not whether the appellate judges would have chosen the same sentence.

7. Conclusion

The opinion clarifies that vulnerable-victim sentencing turns on demonstrated exploitation of a condition or need connected to the particular fraud—not necessarily an impaired ability to uncover deception. Individualized evidence established that the defendants used financial hardship and other circumstances to obtain the custody essential to their scheme.

Fifteen qualifying victims supported the additional enhancement, and Koch’s aiding-and-abetting responsibility made personal contact with every victim unnecessary. The decision also preserves substantial sentencing discretion concerning rehabilitation and unusually grave nonfinancial harm, while leaving intact the requirements of accurate Guidelines calculation, individualized findings, and reasoned explanation. Both prison sentences were affirmed.