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Texas firm, CEO plead guilty in Va. insurance case

Wednesday - 9/11/2013, 5:38pm  ET

ABINGDON, Va. (AP) -- A Texas company that provided insurance to Virginia Tech students has pleaded guilty to racketeering and money laundering.

GM-Southwest Inc. and its CEO and former owner, 73-year-old John Paul Gutschlag Sr. of Aubrey, Texas, both entered guilty pleas Wednesday in federal court in Abingdon. Wire fraud, mail fraud and conspiracy charges 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, Texas-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.

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