RICHMOND, Va. (AP) — A Texas company that provided health insurance to Virginia Tech students fraudulently overstated claims by more than $9 million to boost its profits, according to a 57-count federal indictment unsealed Tuesday.
The grand jury indictment in U.S. District Court in Abingdon, Va., charges GM-Southwest Inc. and its former owner, 73-year-old John Paul Gutschlag Sr., with racketeering, conspiracy, money laundering and fraud. 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.
Company officials in Frisco, Texas, did not immediately return a telephone message, and no phone listing could be located for Gutschlag in the Frisco area. Court documents do not list an attorney for the defendants.
The indictment seeks forfeiture of the defendants’ property and bank accounts, which were frozen Tuesday by U.S. Magistrate Judge Pamela Meade Sargent.
“This is a step in the process of trying to recoup the losses that we believe we sustained,” Virginia Tech spokesman Mark Owczarski said in a telephone interview. “It’s clearly a lot of money, and given the fiscal realities, these are state resources and we need to make sure they are used and managed most effectively.”
According to the indictment, GM-Southwest is a third-party administrator of health insurance for secondary school and college students. Major insurance carriers provide the coverage, but GMS collects premiums, pays claims and reports the transactions to both the schools and the carriers. The carriers pay GM-Southwest a commission or fee for the service.