Equipment company sues man behind bars for fraudulent inducement, breach of contract

A telecommunications equipment company is suing over claims a student health insurance company whose CEO was indicted for racketeering has failed to pay fees it allegedly owes for equipment rental.

AT&T Capital Services Inc. filed a breach of contract lawsuit Oct. 8 in Cook County Circuit Court against GM-Southwest Inc. (GMS) and John Gustchlag.

According to the complaint, AT&T Capital Services entered into an agreement on May 21, 2012 to provide telecommunications equipment, installation and training services to GMS, a company in the business of running student health plans and whose former CEO is Gustchlag.

The plaintiff company claims Gustchlag's daughter confirmed the receipt of the equipment in good working order per the lease agreement on Dec. 1, 2012, but GMS has failed to make the required payments. It alleges AT&T Capital Services owes it more than $51,900 in past and future rent payments and has refused to return the equipment.

The plaintiff further claims Gustchlag intentionally prepared misleading financial statements that failed to disclose to AT&T Capital Services and others that a portion of the GMS' revenue was derived from health insurance fraud schemes at secondary schools and universities such as Virginia Tech, where they falsely inflated claims numbers to back up a higher premium.

The complaint states Gustchlag pleaded guilty to conspiring to violate racketeering laws and money laundering in 2013 and is currently incarcerated.

AT&T Capital Services says the fraudulent information provided led the company to issue $91,000 in financing for the purchase of equipment, which it would not have done had it known the truth of GMS' revenue.

GMS is accused of breach of contract, and Gustchlag is accused of fraudulent inducement.

The plaintiff is seeking the more than $51,900 it alleges is owed, plus attorney fees and interest. It is being represented by attorneys Michael O'Rourke and Rafael A. Bombino of O'Rourke & Moody in Chicago.

Cook County Circuit Court case number: 2014L010483.

This is a report on a civil lawsuit filed in Cook County Circuit Court. The details in this report come from an original complaint filed by a plaintiff. Please note, a complaint represents an accusation by a private individual, not the government. It is not an indication of guilt and it only represents one side of the story.