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.
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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.