Gross Receipts Plus Silence: Tenth Circuit Adopts Tax-Style Burden of Production for Expenses in SSA Disability-Fraud and Expands Loss to Foreseeable Dependent and Post-Period Benefits

Introduction

In United States v. Sandoval, the Tenth Circuit affirmed convictions and a fifteen-month sentence arising from a Social Security disability benefits fraud scheme premised on undisclosed business income from a jewelry enterprise. The case squarely presented two salient issues for fraud prosecutions tied to needs-based or income-capped federal benefits:

• What evidentiary showing suffices to prove that a self-employed recipient’s “countable income” exceeded regulatory caps when the government has evidence of substantial gross receipts but limited visibility into business expenses?
• How should sentencing courts calculate “loss” under the Guidelines when benefits also flowed to dependent children and continued outside the indictment period?

The court answered both in ways that will materially influence future disability-fraud cases. First, invoking a line of federal tax cases, the Tenth Circuit held that the government may establish sufficiency by proving large gross receipts and concealment while the defendant—who uniquely controls information about expenses—bears the burden of production to supply expense evidence if he contends that net, “countable” income fell below regulatory caps. Second, at sentencing, the court approved including as “actual loss” the reasonably foreseeable benefits paid to the defendant’s children and post-charged-period payments that continued after termination of eligibility, even without proof of income during that later span.

Case Overview

Defendant James Anthony Sandoval began receiving disability insurance benefits in 2008 after a COPD diagnosis. While receiving benefits, he operated a jewelry business, selling through two stores, trade shows, and shipments across multiple states. The Social Security Administration (SSA) investigated and, in administrative interactions in 2020 and 2021, Mr. Sandoval denied working and denied having any income since 2007.

Under SSA regulations governing self-employment, eligibility turns on “countable income,” which is effectively net earnings from self-employment after allowable business expenses, subject to monthly caps (here, $1,170 in 2017 up to $1,260 in 2020). See 20 C.F.R. § 404.1575. After reviewing account records and tax filings, the SSA concluded Mr. Sandoval was ineligible and terminated benefits. A federal indictment followed: 33 counts of taking government property, 18 U.S.C. § 641, and 2 counts of making false statements (18 U.S.C. § 1001(a)(2); 42 U.S.C. § 408(a)(3)).

A jury convicted on all counts. The district court calculated “actual loss” at $182,735.10, which produced a § 2B1.1(b)(1)(F) 10-level enhancement (2021 Guidelines) and an offense level of 16. Mr. Sandoval appealed, challenging evidentiary sufficiency, the omission of a jury instruction defining “income,” and the loss calculation (including pre- and post-charged period payments, dependent benefits, and Medicare premiums).

Summary of the Opinion

• Sufficiency of the Evidence: Affirmed. The government presented unrebutted evidence of very large gross receipts, efforts to conceal income, and Mr. Sandoval’s failure to provide expense data when SSA asked for it. Drawing on tax cases, the court held the government could rely on gross receipts and the defendant’s non-production of expense evidence to allow a jury to infer countable income exceeded the caps.
• False Statements: Affirmed. Evidence that Mr. Sandoval earned at least “some” income rendered false his 2020–2021 denials. Materiality is objective and does not require actual reliance by the agency.
• Jury Instructions: No reversible error. The defendant forfeited key arguments by raising them only in reply. In any event, the district court acted within its discretion in declining to define “income” to avoid confusion across counts and allowing counsel to argue the regulatory definition in closing.
• Sentencing—Loss Calculation: Affirmed. The court permissibly included:
  • Pre-charged period losses (March 2015–May 2017) based on SSA’s administrative analysis of his accounts and returns;
  • Post-charged period losses (March 2020–June 2021) because eligibility had been terminated in 2017 and he did not reapply, making later payments wrongful regardless of income during that span;
  • Dependent child benefits as reasonably foreseeable consequences of his fraud, not dependent on joint criminal activity with his ex-wife;
  • Medicare premiums were potentially debatable, but any error was harmless because subtracting them would not change the Guidelines offense level.

Analysis

Precedents Cited and Their Influence

• Sufficiency and burden allocation:
  • United States v. Joseph, 108 F.4th 1273 (10th Cir. 2024) sets the de novo standard for sufficiency, viewing evidence favorably to the government.
  • Tax cases uniformly require the government to show receipts and the taxpayer to produce evidence of deductions/expenses:
    • Siravo v. United States, 377 F.2d 469 (1st Cir. 1967); United States v. Tarwater, 308 F.3d 494 (6th Cir. 2002); United States v. Bender, 218 F.2d 869 (7th Cir. 1955); United States v. Orlowski, 808 F.2d 1283 (8th Cir. 1986).
  • Allocation grounded in “superior access to information”: Alabama Dep’t of Environmental Conservation v. EPA, 540 U.S. 461, 494 n.17 (2004); United States v. N.Y., New Haven & Hartford R.R. Co., 355 U.S. 253, 256 n.5 (1957).
• False statements and materiality:
  • United States v. Iverson, 818 F.3d 1015 (10th Cir. 2016): sufficiency on any one statutory means supports conviction.
  • United States v. Williams, 934 F.3d 1122 (10th Cir. 2019), and 865 F.3d 1302 (10th Cir. 2017): materiality uses an objective “natural tendency to influence” test.
  • United States v. Whitaker, 848 F.2d 914 (8th Cir. 1988); United States v. LeMaster, 54 F.3d 1224 (6th Cir. 1995); United States v. Neder, 197 F.3d 1122 (11th Cir. 1999): materiality does not turn on whether the government actually relied or believed the falsehood.
  • United States v. Peister, 631 F.2d 658 (10th Cir. 1980) and United States v. Freeman, 147 F.4th 1 (1st Cir. 2025): juries may disbelieve exculpatory tax filings or testimony.
• Jury instruction and preservation:
  • United States v. Bedford, 536 F.3d 1148 (10th Cir. 2008) (abuse-of-discretion review of instructions); United States v. Walker, 918 F.3d 1134 (10th Cir. 2019) (arguments raised for first time in reply are forfeited).
• Sentencing—loss and relevant conduct:
  • U.S.S.G. §§ 2B1.1, 1B1.3 (2021); United States v. Wright, 848 F.3d 1274 (10th Cir. 2017) (greater of actual or intended loss); United States v. Griffith, 584 F.3d 1004 (10th Cir. 2009) (preponderance standard); United States v. Ary, 518 F.3d 775 (10th Cir. 2008) and United States v. Hahn, 551 F.3d 977 (10th Cir. 2008) (clear error review).
  • Marshall v. Chater, 75 F.3d 1421 (10th Cir. 1996): once SSA terminates for substantial gainful activity, a claimant must reapply.
  • United States v. Agrawal, 97 F.4th 421 (6th Cir. 2024): if ineligible, loss equals full amount of benefits “obtained.”
  • Preservation/waiver at sentencing: United States v. Dwyer, 245 F.3d 1168 (10th Cir. 2001); United States v. Kearn, 863 F.3d 1299 (10th Cir. 2017); United States v. Roach, 896 F.3d 1185 (10th Cir. 2018); Mesa v. White, 197 F.3d 1041 (10th Cir. 1999); United States v. Fernandez-Barron, 950 F.3d 655 (10th Cir. 2019).
  • Harmless error and Guidelines impact: United States v. Harrison, 743 F.3d 760 (10th Cir. 2014); United States v. Kaufman, 546 F.3d 1242 (10th Cir. 2008); United States v. Swanson, 360 F.3d 1155 (10th Cir. 2004); United States v. Westerfield, 714 F.3d 480 (7th Cir. 2013).

Legal Reasoning

1) Sufficiency: From Gross Receipts to Countable Income

The central evidentiary problem is that SSA eligibility turns on “countable income,” which, for the self-employed, is net of business expenses under 20 C.F.R. § 404.1575(c)(1). The government’s proof showed:

• Massive gross receipts: approximately $1.9 million in transactions over five years, including over $385,000 of credits (June 2017–May 2018) and over $286,000 (August 2018–March 2019).
• Concealment: instructions to ignore cash sales; routing proceeds into his mother’s account; filing taxes through a business not including the mother.
• Operational scale: custom work since 2004; business since 2009; shows across 15–16 states; about 52 shows in 2018; multiple vehicles; national shipping; “high-end” sales including a >$1,000 ring; suppliers receiving thousands monthly from him.
• Failure to provide expense data: after SSA requested information that might reduce countable income, Mr. Sandoval supplied none.

Faced with this record, the court analogized to tax prosecutions where taxable income equals gross income minus deductions and courts uniformly expect the defendant to produce deduction evidence in his special knowledge. Those authorities justify allowing the jury to infer that countable income exceeded low SSA caps when:

• Gross receipts “tower” above monthly caps, making it implausible that expenses would reduce net below the threshold absent some reasonable expense showing; and
• The defendant, asked for expense information, remains silent or uncooperative.

Importantly, the court acknowledged “gray areas” in which the magnitude of gross receipts and the nature of a business might matter. Where receipts are modest, expenses might, as a practical matter, drop net below caps; where they are very high, it is reasonable to infer that expenses are unlikely to reduce net below such low thresholds without concrete proof from the person who has it. This calibrated reasoning respects the burden of persuasion remaining with the government while placing the burden of production for expense details on the defendant, consistent with fairness and information asymmetry principles recognized by the Supreme Court.

2) False Statements: Income Denials and Objective Materiality

Mr. Sandoval’s 2020 interview and 2021 written report stated that he was not working and had no income. Even assuming arguendo the “not working” assertion is debatable, the government needed only to prove falsity as to one means; the “no income” denial was contradicted by substantial evidence of income. Reliance on tax returns showing no taxable income was unavailing; the jury was free to disbelieve them in light of contradicting evidence.

The materiality challenge failed because the test is objective: whether the false statement had a natural tendency or capability to influence SSA decisions. That SSA did not believe the falsehoods is legally irrelevant; knowing falsity by the listener does not defeat materiality.

3) Jury Instruction on “Income”: Discretion and Preservation

Although the term “income” was important to eligibility, the district court declined to define it in jury instructions. Two reasons carried weight:

• Counsel could and did argue the regulatory definition in closing to focus jurors on the net-versus-gross distinction without risking confusion; and
• “Income” was used differently across counts (benefits eligibility versus false statements), so a single definition risked confusing jurors about the questions actually posed to Mr. Sandoval in his statements counts.

On appeal, the defendant focused on the term’s importance but did not timely address the district court’s articulated rationales in his opening brief; raising them in reply was too late. On the merits, the court found no abuse of discretion in the district court’s approach to avoid confusion while allowing argument on the regulatory standard.

4) Sentencing—Loss Calculation Under § 2B1.1

The district court used “actual loss” of $182,735.10, triggering the 10-level enhancement for losses between $150,000 and $250,000. The Tenth Circuit affirmed the inclusion of several components:

• Pre-charged period (March 2015–May 2017): An SSA employee’s testimony established that SSA’s proposed termination decision for this period was based on Mr. Sandoval’s accounts and tax returns, supporting that benefits were improperly received.
• Post-charged period (March 2020–June 2021): The SSA had terminated eligibility effective December 2017. Because Mr. Sandoval did not reapply, subsequent payments were wrongful regardless of contemporaneous income. The court cited Sixth Circuit authority approving loss as the full benefit amount where the defendant was ineligible.
• Dependent children’s benefits: The court treated the children’s benefits as reasonably foreseeable consequences of Mr. Sandoval’s fraud, not as joint criminal conduct by the ex-wife. The defense forfeited a foreseeability challenge in district court and on appeal; in any event, the foreseeability finding was sound.
• Medicare premiums: Even assuming error in including $10,694.70, subtracting that amount would not change the offense level; the error was harmless.

Impact and Implications

A. Proving “Countable Income” in SSA Fraud Prosecutions

Sandoval supplies a pragmatic prosecutorial roadmap for self-employment cases:

• Show gross receipts, preferably across multiple sources (bank credits, vendor records, customer testimony, supplier accounts).
• Develop evidence of concealment (e.g., cash-sale suppression, routing proceeds through third-party accounts, inconsistent tax filings).
• Create a record that SSA requested expense information germane to netting and that the defendant did not provide it.

Against this backdrop, the jury may infer that countable income exceeded low monthly caps absent credible expense proof from the defendant. The approach aligns disability-fraud cases with tax-prosecution doctrine on burdens of production, without displacing the government’s ultimate burden of persuasion.

B. Defense Strategy Adjustments

• Maintain detailed expense records and be prepared to produce them when SSA inquires; failure to do so now carries clear appellate consequences.
• If contending that expenses drove net income below caps, offer corroborated expense evidence at trial rather than resting on the government’s inability to reconstruct expenses from third-party sources.
• Preserve instruction issues by addressing the trial court’s stated rationales in the opening appellate brief; do not wait for reply.

C. Loss Calculation Practices

• Dependent Benefits: Sandoval endorses counting benefits to minor dependents as actual loss where the defendant’s ineligibility foreseeably triggered those payments. Proof of joint activity is not required.
• Outside the Indictment Period: Loss calculation may encompass pre- and post-charged payments that are part of the same course of conduct or flow from a prior eligibility termination, especially when the defendant fails to reapply.
• Harmless Error in Loss: Courts will not remand for minor loss adjustments that do not change the offense level; defendants seeking resentencing will need to show a plausible Guidelines or outcome effect.

Complex Concepts Simplified

• Countable income (SSA context): For self-employed claimants, SSA evaluates net earnings after allowable business expenses. Even large gross sales can yield low countable income if documented expenses are equally large—but the claimant must substantiate those expenses when asked.
• Burden of production vs. burden of persuasion: The government must ultimately prove guilt beyond a reasonable doubt (burden of persuasion). However, when facts are uniquely within the defendant’s knowledge (e.g., business expenses), courts expect the defendant to come forward with that evidence (burden of production). If he does not, the jury may draw reasonable inferences from the government’s gross receipts and concealment proof.
• Materiality: In false statement cases, “material” means the statement was capable of influencing the decisionmaker—not that it actually did. The government’s disbelief of a lie does not render it immaterial.
• Relevant conduct: For Guidelines purposes, conduct “part of the same course of conduct or common scheme or plan” can be included in loss calculations, even if outside the charged period.
• Actual vs. intended loss: Actual loss is the reasonably foreseeable pecuniary harm that resulted; intended loss is what the defendant purposely sought to inflict. Sentencing uses the greater of the two.
• Foreseeability in loss: Loss attributable to a defendant includes harm that he knew or reasonably should have known would result—such as dependents receiving derivative benefits triggered by his ineligibility.
• Harmless error: An error is harmless if it did not affect substantial rights—often measured by whether the Guidelines offense level or sentencing range would have been different.

Key Evidence and Reasoning Highlights

• Massive receipts vs. low caps: With monthly caps of $1,170–$1,260, evidence of hundreds of thousands in annual credits naturally supports an inference that net exceeded caps absent extraordinary expenses.
• Concealment behaviors: Ignoring cash sales, using a parent’s account, and inconsistent filings are classic hallmarks of concealment that bolster inferences of knowing ineligibility.
• SSA requests and silence: The SSA specifically sought expense information to evaluate eligibility; Mr. Sandoval did not provide it. The jury could infer that expenses sufficient to drop net below caps either did not exist or would not be credibly provable.
• Statements and materiality: Absolute denials of “any income” were untenable on this record and plainly material to continued eligibility reviews.
• Post-termination payments: Once SSA terminates eligibility for substantial gainful activity and the claimant does not reapply, later benefits are wrongful regardless of later income levels.
• Dependent benefits: Payments to minor children are a foreseeable outgrowth of an eligible parent’s benefit status; where the parent’s eligibility is fraudulently maintained, those derivative payments are actual loss tied to the parent’s conduct.

Practical Takeaways

• For prosecutors:
  • Build a record of SSA’s targeted requests for business-expense information and the defendant’s noncompliance.
  • Tie together banking data, third-party vendor/customer testimony, and concealment evidence to show magnitude and intentionality.
  • Document eligibility termination and lack of reapplication to support inclusion of post-charged-period payments in loss.
  • Establish foreseeability of dependent benefits to include them in actual loss.
• For defense counsel:
  • Be prepared to produce robust, contemporaneous expense records if arguing that net income fell below SSA caps.
  • Timely preserve instruction challenges by responding to the district court’s reasoning in the opening brief.
  • Challenge foreseeability findings at sentencing with specific arguments and evidence; failure to do so risks forfeiture.
  • If contesting loss components, show how any reduction would change the offense level or provide a concrete basis for a lower sentence.

Conclusion

United States v. Sandoval establishes an important evidentiary and sentencing framework for SSA disability-fraud cases in the Tenth Circuit. On evidence, the court imports the tax-prosecution allocation of burdens: the government may prove sufficiency with gross receipts and concealment, while the defendant must produce expense evidence peculiarly within his control if he claims net income stayed below eligibility caps. On sentencing, the court confirms that actual loss encompasses reasonably foreseeable payments beyond the indictment window—including dependent benefits and post-termination payments where the defendant did not reapply—while reinforcing that immaterial loss adjustments that do not affect the offense level are harmless.

The opinion will streamline government proofs in self-employment disability-fraud prosecutions and recalibrate defense strategies toward proactive documentation and disclosure of expenses. It also offers clear guidance to district courts on handling definitional instructions that carry a risk of cross-count confusion, and on drawing loss boundaries that reflect the practical realities of SSA benefit administration.