Dallas lawyers need to be aware of insurance companies that are breaking the laws so that they can scrutinize new cases with an awareness of the wrongs these companies have a history of performing.
The Virginia Times Dispatch ran an article on April 10, 2013, titled, Texas Insurance Firm Accused of Defrauding Tech Students. The article tells us 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 charges GM-Southwest Inc. and its former owner, 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, 73, 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.
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.
The indictment says the company, at Gutschlag’s direction, reported accurate figures to the carriers but inflated claims numbers to the university over a seven-year period beginning in the 2003-04 academic year. It says the university’s risk manager retired in 2010 and that the employee’s successor questioned the accuracy of EM-Southwest’s reports.
Virginia Tech spokesman Mark Owczarski said an internal review of the program determined the university was overcharged. He said university officials reported the findings to the Virginia attorney general’s office, which turned it over to federal authorities.
The indictment charges the defendants with 41 counts of mail fraud, seven counts of wire fraud, five counts of money laundering and one count each of racketeering, mail fraud conspiracy, wire fraud conspiracy and money laundering conspiracy.
U.S. Attorney Timothy J. Heaphy’s office says that if convicted, Gutschlag could face up to 20 years in prison and a $500,000 fine on each count. The company also could be fined $500,000 per count. No hearing dates are set.
These actions, if true, involve violations of criminal law. In Texas, these violations would be subjected to scrutiny by the Texas Department of Insurance. There appear to be violations of the Texas Insurance Code, the Texas Deceptive Trade Practices Act, and at the least common law negligence, fraud, and breach of contract.
It is a shame when a company resorts to these types of behavior but there are remedies most experienced Insurance Law Attorneys know about, for those who are victims.
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