ABINGDON, Va. (September 11, 2013)--GM-Southwest Inc., which provided insurance to Virginia Tech students, and its CEO and former owner, John Paul Gutschlag, Sr., 73, of Aubrey, pleaded guilty to racketeering and money laundering Wednesday in U.S. District Court in Abingdon, Va.
Wire fraud, mail fraud and conspiracy charges included in a 57-count federal indictment were dropped in a plea agreement.
Gutschlag and the company admitted overstating claims by more than $1 million to boost profits.
The Frisco-based company is a third-party administrator of student health insurance.
Major insurance carriers provide coverage, but pay GMS a fee for collecting premiums and paying claims.
The indictment said that by overstating claims, GMS was able to charge higher premiums and discourage competitors from bidding to provide the service.