United States v. Hess: Exploited Financial Hardship Can Support Vulnerable-Victim Enhancements Without Proof of Impaired Fraud Detection

1. Introduction

In United States v. Hess, the Tenth Circuit clarified when financial hardship makes a fraud victim “unusually vulnerable” under the federal Sentencing Guidelines. The central principle is that vulnerability need not diminish a victim’s ability to recognize or stop fraud. It can instead make the victim particularly susceptible to the fraudulent offer itself, provided individualized evidence connects that vulnerability to the offense.

Megan Hess operated a Colorado funeral home and a related organization that sold human remains. Her mother, Shirley Koch, assisted in the business, including dismembering bodies and preparing remains for sale. Over several years, they obtained and sold bodies or body parts without informed authorization, exceeded limited donation permissions, and charged families for cremations that did not occur. Families sometimes received cremated remains falsely represented as those of their loved ones.

Both defendants pleaded guilty to mail fraud and aiding and abetting. Following an earlier appellate reversal of several sentencing determinations, the district court resentenced Hess to 240 months and Koch to 180 months—the same prison terms originally imposed, despite lower advisory Guidelines ranges.

Their second appeals raised three principal questions: whether the district court adequately identified a large number of unusually vulnerable victims; whether it improperly discounted Hess’s rehabilitation in prison; and whether Koch’s substantial upward variance was substantively unreasonable. The court rejected each challenge.

2. Background and Summary of the Opinion

The fraudulent scheme

Hess’s organization, Donor Services, ostensibly helped people who could not afford funeral or cremation services. In practice, sales of human remains financed inexpensive cremations that attracted additional customers and supplied more bodies for the scheme. The FBI concluded that the remains of 560 decedents were almost certainly obtained and sold fraudulently. Of 811 documented individuals, investigators identified only 42 whose remains had been obtained through informed consent; consent could not be determined for another 209.

The misconduct was not simply the sale of donated remains. It involved deception about authorization, the scope and purpose of donations, the provision of cremation services, and the identity of returned ashes. Purchasers were also misled: the defendants falsely represented remains as freely donated and sometimes falsified negative disease-test results.

The first appeal and resentencing

In United States v. Hess, 106 F.4th 1011 (10th Cir. 2024), the court found errors in the original loss calculations and reversed the sophisticated-means enhancement applied to Koch. It also rejected the district court’s original vulnerable-victim analysis.

That analysis improperly counted people already deceased when the fraud occurred as vulnerable victims and assumed that all grieving relatives were unusually susceptible to the scheme. The appellate court required particularized findings explaining how an individual vulnerability actually enabled or facilitated the fraud.

On remand, the Government introduced additional victim statements and expert testimony about susceptibility to fraud following stressful life events. The district court identified 21 particular victims and again applied the additional two-level enhancement for an offense involving a large number of vulnerable victims.

Principal appellate holdings

• Individualized vulnerability: The record supported findings for 15 victims, enough to sustain the enhancement without reviewing the remaining six.
• No fraud-detection requirement: The Guidelines do not require proof that vulnerable victims were less capable of detecting or thwarting the fraud.
• Numerical sufficiency: Fifteen vulnerable victims constitute a “large number” in this mail-fraud context. The court did not establish a universal minimum.
• Aiding-and-abetting liability: Koch’s lack of personal interaction with every vulnerable victim did not exclude those victims from her relevant conduct.
• Rehabilitation: Hess failed to establish plain error warranting reversal of the district court’s treatment of her prison rehabilitation.
• Substantive reasonableness: Koch’s 180-month sentence fell within the district court’s permissible sentencing discretion.

3. Analysis: Legal Reasoning and Precedents Cited

A. The Guidelines framework and standards of review

Section 3A1.1(b) operates in two stages. Under subsection (b)(1), a defendant receives a two-level increase if the defendant knew or should have known that a victim was vulnerable. Under subsection (b)(2), another two levels apply when subsection (b)(1) applies and the offense involved a large number of vulnerable victims. Neither defendant challenged the initial enhancement in this appeal.

The commentary defines a vulnerable victim as someone harmed by the offense or relevant conduct who is unusually vulnerable because of age, physical or mental condition, or other particular susceptibility to the criminal conduct. The inquiry is therefore relational: the identified condition must matter to the particular offense, not merely describe a generally disadvantaged person.

United States v. Rocha, 145 F.4th 1247 (10th Cir. 2025), supplied the general review framework: legal conclusions receive de novo review, factual findings receive clear-error review, and sentencing decisions are reviewed for abuse of discretion. United States v. Tony, 121 F.4th 56 (10th Cir. 2024), directed the court to examine the Guidelines’ language and interpretive commentary to determine the Sentencing Commission’s intent. Under the approach stated there, commentary governs unless constitutionally or statutorily invalid, plainly erroneous, or inconsistent with the provision it interprets.

United States v. Sumka, 81 F.4th 1153 (10th Cir. 2023), distinguished factual identification of vulnerable victims from legal questions about whether found facts justify an enhancement. As in that decision, the panel did not resolve the parties’ disagreement over the applicable standard because the enhancement survived either standard.

B. Vulnerability requires a connection to the particular fraud

The significance of the earlier decision

The 2024 decision in United States v. Hess established the controlling requirement for remand: a victim’s vulnerability must enable or facilitate this particular fraud. Grief alone had not supplied that connection. The original record showed that the defendants defrauded customers regardless of whether they agreed to donations, and their position of trust and unsupervised custody of bodies explained their ability to carry out the scheme.

The new opinion did not abandon that requirement. It held that the expanded record now explained how particular vulnerabilities helped the defendants obtain the custody that made their fraud possible. Financially distressed customers were induced to entrust bodies to the defendants because they needed the cheap or free services being falsely promised.

Distinguishing an opportunity to meet a victim from exploitation of vulnerability

United States v. Proffit, 304 F.3d 1001 (10th Cir. 2002), was central to both sides’ arguments. There, a rancher’s cancer diagnosis prompted him to advertise his ranch for sale. A purported buyer subsequently persuaded him to invest in fraudulent cattle-futures trading. The diagnosis created the opportunity for contact, but the investment decision appeared motivated by the ordinary attraction of a quick financial return. The medical condition was not sufficiently connected to the investment fraud.

Importantly, that decision suggested a different result if the defendant had exploited the illness-driven sale to defraud the rancher of the ranch itself. The present panel used that distinction to explain why vulnerability must connect to the actual fraud—not merely to the circumstances in which the parties met.

Here, the financial need was directly connected to the transaction being falsified. The defendants promised affordable cremations, secured possession of bodies on that basis, and then sold the remains instead. The victims’ financial circumstances did more than introduce them to the defendants; they made the deceptive offer particularly effective.

Why inability to detect or thwart fraud is not required

Hess relied on United States v. Fosher, 124 F.3d 52 (1st Cir. 1997), for language asking whether a victim was less likely to detect or thwart an offense. The Tenth Circuit declined to adopt that formulation as a necessary test. It was not binding circuit authority, and neither the Guidelines nor the court’s precedents imposed that limitation.

The commentary’s example of an ineffective cancer cure illustrated the point. A cancer patient need not have inferior powers of investigation to be especially susceptible to a false promise of treatment. The illness supplies the particular need that the fraudulent marketing exploits. Likewise, a person unable to afford funeral expenses may be especially susceptible to a false promise of free cremation without being unusually gullible.

The distinction matters because a sophisticated fraud may deceive everyone who encounters it. That does not prevent an enhancement when an offender exploits particular victims’ circumstances to bring them into the scheme.

C. Particularized findings are different from class-based assumptions

The opinion carefully preserved the prohibition against treating membership in a broad demographic or social group as sufficient proof of vulnerability.

• United States v. Tissnolthtos, 115 F.3d 759 (10th Cir. 1997), rejected an assumption that a 71-year-old assault victim was unusually vulnerable based solely on age. Individual findings were necessary because that age did not make unusual susceptibility self-evident.
• United States v. Drapeau, 110 F.3d 618 (8th Cir. 1997), provided the contrasting example discussed favorably in the preceding decision: a one-year-old assault victim’s inability to protect himself or report the abuse made the inference from age exceptionally strong.
• United States v. Creech, 913 F.2d 780 (10th Cir. 1990), rejected the assumption that newlyweds were unusually susceptible to threats against their spouses. The record did not distinguish their vulnerability from that of other married people.
• United States v. Brunson, 54 F.3d 673 (10th Cir. 1995), rejected an enhancement based on successful fraud against a foreign company and the defendant’s belief that foreign companies were easier to deceive. Neither success nor the offender’s subjective assumption established objective unusual susceptibility.

These decisions required evidence, not simply labels. On remand, the district court examined victims’ income, debt, caregiving responsibilities, health, isolation, and actual reasons for choosing Sunset Mesa. It also considered the defendants’ individualized promises and inducements. That evidence distinguished the new findings from the original assumption that grief made every affected family unusually vulnerable.

The evidence supporting 15 victims

Five findings involving terminal illness or hospice-related circumstances were not contested by Hess: C.A.H., D.S., L.A.P., K.R., and C.B. The appellate court also sustained findings involving ten financially vulnerable victims: M.B., D.Mc., J.D., D.W., K.B., T.F., A.S.J., M.C.-P., R.B., and N.H.

Several examples demonstrate the necessary connection:

• M.C.-P. had little income and serious health problems. The defendants persuaded her to abandon planned embalming for a cheaper cremation, then sold her grandmother’s body rather than providing the promised service.
• J.D. could not immediately afford his grandfather’s cremation. Koch offered free cremation in exchange for a purported brain donation for Alzheimer’s research. The entire body was instead sold to a plastination company.
• T.F. faced debt following her husband’s lengthy cancer treatment and selected Sunset Mesa because it was cheaper than her local funeral home.
• N.H. had to borrow money for funeral expenses and selected the defendants because of their prices and assurances that they would properly care for her husband.

Expert testimony supported the broader relationship between accumulated life stressors and fraud susceptibility. Nevertheless, the district court accepted only four of the expert’s eleven highlighted examples as satisfying the required nexus and relied on other victim statements for additional findings. The enhancement thus rested on individual evidence rather than automatic acceptance of a generalized risk profile.

The appellate court did not decide whether the remaining six findings were correct. Its decision to stop at 15 means those additional findings were unnecessary to the outcome, not that they were held invalid.

Shared vulnerabilities can still be individually established

United States v. Caballero, 277 F.3d 1235 (10th Cir. 2002), supported the distinction between a shared vulnerability and an unsupported class presumption. That decision upheld an enhancement where defendants exploited undocumented immigrants’ language barriers, unfamiliarity with American law, cultural backgrounds, and immigration status in an immigration-fraud scheme. Several victims may share a vulnerability without the findings becoming impermissibly categorical.

United States v. Scott, 529 F.3d 1290 (10th Cir. 2008), likewise illustrated a demonstrated connection: the defendant exploited a minor victim’s small stature and unusual naivety to facilitate trafficking. Quoting United States v. Castaneda, 239 F.3d 978 (9th Cir. 2001), that decision explained the enhancement’s rationale as greater punishment for conduct made more blameworthy by the exploitation of particular victims.

The panel considered that rationale satisfied here. Offering unaffordable alternatives’ apparent solution to bereaved, impoverished customers, while intending to sell their relatives’ bodies, was not merely an ordinary fraud that happened to affect poor people. The financial hardship was part of what made the deception work.

D. Fifteen victims satisfy the “large number” requirement in this context

The Guidelines do not state one numerical threshold for every offense under § 3A1.1(b)(2). The panel therefore treated the phrase “large number” contextually.

United States v. Kaufman, 546 F.3d 1242 (10th Cir. 2008), involved exploitation of mentally ill residents in an unlicensed group home, including forced labor and involuntary servitude. Acknowledging the lack of clear numerical guidance, that decision looked to the offense-specific involuntary-servitude Guideline and held that ten victims constituted a large number in that setting. It remanded for particularized vulnerability findings.

United States v. Anderson, 349 F.3d 568 (8th Cir. 2003), appeared through that discussion as authority recognizing that the phrase was “largely uninterpreted.” It supplied background to the interpretive difficulty, rather than a controlling numerical rule.

For mail fraud, the present panel looked to § 2B1.1(b)(2), which contains victim-related thresholds of five, ten, and twenty-five. It also relied on United States v. Caballero, where sixteen vulnerable victims had supported the enhancement in a fraud case.

The resulting holding was deliberately narrow: fifteen was sufficient here. The court did not decide whether five or ten would suffice, did not require twenty-five, and did not transform the involuntary-servitude benchmark into a universal rule. The opinion therefore provides a clear sufficient number for this context while leaving the minimum threshold unresolved.

E. Koch’s liability extended beyond victims she personally approached

Koch argued that she had little meaningful contact with most of the identified victims and therefore could not have personally exploited their vulnerabilities. The panel rejected that argument by reading § 3A1.1 together with the relevant-conduct provision.

The commentary includes victims of conduct for which the defendant is accountable under § 1B1.3. That provision encompasses acts the defendant committed, aided, or abetted during the offense, its preparation, or efforts to avoid responsibility. Koch’s accountability therefore included the conduct she aided and abetted in the scheme, not merely her own conversations with customers.

The court also distinguished the two enhancement stages. Subsection (b)(1) expressly requires that the defendant knew or should have known of a victim’s vulnerability. Subsection (b)(2) adds no separate requirement that the defendant know the vulnerability of every victim counted toward the large number. Once the initial enhancement applies, the additional inquiry concerns the offense and its relevant conduct.

United States v. Boll, 3 F.4th 1099 (8th Cir. 2021), did not support Koch’s narrower reading. Its contextual approach considered the offense of conviction and all relevant conduct, asking whether the vulnerable-victim count exceeded that typical of offenses of the same kind. “Context” meant the kind of offense, not only the defendant’s personal participation.

This does not make every associate automatically responsible for every victim. The necessary foundation remains conduct attributable to that defendant under the Guidelines. Here, Koch’s admitted aiding and abetting supplied that foundation.

The Government’s contrary sentencing position

The Government recommended against applying the additional enhancement to Koch because of its plea agreement. That position did not bind the district court’s legal interpretation.

United States v. Ronquillo, 94 F.4th 1169 (10th Cir. 2024), illustrated the governing principle: courts are not bound by parties’ stipulations on questions of law. There, the court independently considered a warrant’s scope despite the Government’s concession below.

Richison v. Ernest Grp., 634 F.3d 1123 (10th Cir. 2011), supported the distinction between arguments seeking reversal and those defending an existing judgment. The Government, as appellee, could generally defend the judgment on a ground supported by the record despite its earlier position.

A separate plea-agreement concern remained unadjudicated. Koch suggested that the Government’s presentation of enhancement-related evidence might have breached its agreement, but did not develop that argument. Under LaFevers v. Gibson, 182 F.3d 705 (10th Cir. 1999), the panel deemed the undeveloped issue waived. The opinion should therefore not be read as approving the Government’s conduct under the agreement on the merits.

F. Rehabilitation evidence: permission to consider is not a right to reduction

Hess submitted evidence of educational work, completed courses, support from inmates and staff, and other constructive prison activities. The district court acknowledged her conduct but described compliance with prison requirements as both commendable and expected. It also noted the availability of good-time credits.

Hess argued that this reasoning conflicted with Pepper v. United States, 562 U.S. 476 (2011). That decision held that courts resentencing a defendant may consider postsentencing rehabilitation and may use it to support a downward variance in an appropriate case. It rejected categorical prohibitions on considering such evidence and explained that good-time credits and sentence reductions serve distinct penological interests.

Because Hess had not preserved her objection, however, United States v. Kee, 129 F.4th 1249 (10th Cir. 2025), required her to establish all four elements of plain error: error, plainness, an effect on substantial rights, and a serious effect on the fairness, integrity, or public reputation of judicial proceedings.

The panel assumed, without deciding, that an error occurred. It nevertheless rejected relief on two independent grounds:

1. No clearly established error: Pepper v. United States does not require a sentence reduction whenever rehabilitation is shown, nor does it expressly make good-time credits irrelevant to the weight assigned to that evidence. Under United States v. Booker, 63 F.4th 1254 (10th Cir. 2023), Hess therefore failed to show an error obvious under current, settled law.
2. No demonstrated effect on the outcome: The district court expressly found the offense’s nature and circumstances sufficient to outweigh the mitigating considerations. Applying the reasonable-probability standard stated in United States v. Booker, the panel found no showing that different treatment of rehabilitation would probably have produced a lower sentence.

This is a limited plain-error holding, not a definitive ruling that the district court’s treatment was error-free. It also does not authorize a categorical refusal to consider rehabilitation merely because prison authorities award good-time credit.

G. Extraordinary harm justified Koch’s substantial upward variance

Koch emphasized her age, serious health conditions, limited criminal history, and lesser role. She argued that 180 months could amount to a practical life sentence and was excessive for a white-collar fraud offense. The appellate court held that the district court had considered those circumstances and permissibly assigned greater weight to the offense’s exceptional seriousness.

The district court identified harm that the fraud Guidelines did not adequately capture: unauthorized dismemberment, the deprivation of meaningful decisions about loved ones’ remains, enduring emotional trauma, and profound betrayal of trust. It also considered Koch’s lack of remorse and a prior fraud-related felony that had generated no criminal-history points. Her lesser culpability was reflected in a sentence five years shorter than Hess’s.

United States v. Peña, 963 F.3d 1016 (10th Cir. 2020), and United States v. Holt, 161 F.4th 1253 (10th Cir. 2025), framed the deferential inquiry: the sentence must remain within permissible choices, rather than be arbitrary or manifestly unreasonable. United States v. Rocha further established that an outside-Guidelines sentence carries no presumption of unreasonableness and that appellate courts defer to a reasoned assessment of the § 3553(a) factors.

The panel supported its analysis with several variance precedents:

These authorities did not establish that any offense described as heinous warrants any sentence. Their relevance was the permissibility of substantial, specifically explained variances where the advisory calculation understates the offense’s actual seriousness. The district court supplied that explanation here.

4. Potential Impact and Limits

Fraud vulnerability can concern inducement, not just gullibility

The opinion is important for schemes exploiting urgent needs. A victim may be unusually susceptible because illness, financial distress, or another circumstance makes a particular false promise especially compelling—even when the victim has ordinary judgment and investigative ability. Future cases must still establish the connection with evidence.

Economic hardship is not automatically vulnerable-victim status

Poverty alone does not trigger the enhancement. The prosecution must show how the individual’s financial circumstances enabled or facilitated the actual criminal conduct. Ordinary price sensitivity or the bare fact that a victim chose a cheaper provider does not, without the required individualized connection, establish the rule applied here.

Victim counts remain offense-sensitive

Fifteen is sufficient in this mail-fraud setting, but the decision leaves lower thresholds unresolved. Courts should not treat the ten-victim discussion from involuntary servitude as a fixed rule across all crimes.

Relevant conduct matters more than personal customer contact

Participants cannot defeat the additional enhancement simply by showing that another participant handled victim recruitment. The decisive question is whether the victims fall within conduct properly attributable to the defendant.

Preservation and explanation remain critical at sentencing

Hess’s rehabilitation challenge demonstrates the difficulty of obtaining relief under plain-error review. Defendants should clearly present mitigation and preserve objections to its treatment. Sentencing courts, in turn, benefit from distinguishing ordinary compliance from asserted rehabilitation and explaining the weight assigned to each.

More broadly, a corrected Guidelines calculation does not necessarily require a shorter sentence. The district court must begin with the correct advisory range, but may impose the same term again when its individualized statutory analysis adequately supports that result.

5. Complex Concepts Simplified

Vulnerable victim

A person whose particular circumstances make the specific crime unusually effective against them—not simply someone disadvantaged in general.

Nexus

The necessary connection between the victim’s vulnerability and the offense. Here, financial distress made false promises of affordable cremation particularly effective.

Particularized findings

Evidence-based explanations about individual victims, rather than assumptions about everyone who is elderly, poor, or grieving.

Relevant conduct

Conduct counted at sentencing beyond the defendant’s immediate personal acts, including conduct the defendant aided and abetted.

Scienter

A required state of knowledge. The initial vulnerable-victim enhancement requires knowledge or constructive knowledge; the additional large-number enhancement adds no separate victim-by-victim knowledge requirement.

Upward variance

A sentence above the advisory Guidelines range, justified by the statutory sentencing factors rather than merely by recalculating the range.

Plain-error review

A demanding appellate standard usually applied to unpreserved objections. Showing a possible mistake is insufficient; the defendant must also establish clarity and prejudice, among other requirements.

Substantive reasonableness

Whether the sentence’s length falls within the district court’s permissible choices after considering the case and statutory sentencing purposes.

6. Conclusion

United States v. Hess clarifies that unusual vulnerability can arise from an exploited need, not merely an impaired ability to discover deception. Individual evidence connecting financial distress to fraudulent inducement supported the enhancement, and fifteen vulnerable victims were sufficient in this mail-fraud context.

The decision also confirms the reach of aiding-and-abetting relevant conduct, the limits of an unpreserved rehabilitation challenge, and sentencing courts’ authority to impose substantial, carefully explained variances for harms inadequately reflected in the Guidelines. Its central safeguard remains individualized proof: neither vulnerability nor exceptional punishment may rest on labels alone.