Former Texas Insurance Executive Due in Virginia Court

Tuesday, Apr 30, 2013  |  Updated 6:45 AM CDT
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Former Texas Insurance Executive Due in Virginia Court

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The former owner of a Texas company that provided health insurance to Virginia Tech students is due in federal court for arraignment on charges of racketeering, conspiracy, money laundering and fraud.

A 57-count federal indictment accuses 73-year-old John Paul Gutschlag Sr. and GM-Southwest Inc. of overstating claims by more than $9 million to boost profits. Gutschlag is scheduled to appear Friday afternoon in U.S. District Court in Abingdon.

Frisco, Texas-based GM-Southwest is a third-party administrator of student health insurance. Major insurance carriers provide the coverage, but pay GMS a fee for collecting premiums and paying claims.

The indictment says that by overstating claims, the company was able to charge higher premiums to Virginia Tech and its students and discourage competitors from bidding to provide the service.

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