The Australian Securities and Investment Commission (ASIC) has launched civil proceedings in the Federal Court against five former directors and officers of the Aboriginal Community Benefit Fund for alleged breaches of their duties.
Later known as Youpla, the company sold junk funeral insurance plans to Indigenous people across Australia for over 30 years. This despite concerns being consistently raised by First Nations groups, along with financial, legal and consumer organisations.
The company targeted Aboriginal communities until its collapse last year, going door to door and running misleading advertisements. In 2018, the banking royal commission found it had engaged in conduct below community standards in a number of aspects, including that it relied on the cultural significance of funerals to Indigenous people to advertise its policies.
Youpla was the only funeral fund granted access to the Centrepay system - an automatic deduction from welfare payments set up by the Howard government in 2001 - which enabled Indigenous people to make automatic payments for essentials like rent or food.
Advocates say that this contributed to the problem and the government should also be held accountable.
Data from the liquidator shows there was a 300% increase in cancellations when ACBF-Youpla was removed from Centrepay.
Bettina Cooper of Save Sorry Business told Guardian Australia last year that because it was the only insurance company on Centrepay, it had an air of legitimacy.
"It meant people thought this was a good product because the government allowed it on Centrepay," Ms Cooper said.
Whilst the numbers are not fully known, a total of 30,000 people could have lost as much as $300 million. Many of them were low-income First Nations people; some of them elderly and in palliative care.
ASIC Deputy Chair Sarah Court said its "case seeks to hold to account those involved in the alleged governance failures and director misconduct that impacted the First Nations people who were members of the funds".
Victorian Aboriginal Legal Service chief executive Nerita Waight said VALS had over 80 clients with policies from Youpla come to them for assistance.
"For decades, the private funeral insurance company 'Youpla' aggressively sold poor-value funeral plans to Aboriginal and Torres Strait Islander peoples," she said.
"They subsequently collapsed, leaving thousands of people unable to access funeral plans they had already paid for and unable to cover the cost of grieving loved ones through Sorry Business."
ASIC argues that the directors and officers of Youpla maintained insurance arrangements with Crown - an overseas based company - that was beneficially owned and controlled by two defendants: Mr Pattenden and Mr Law and those arrangements were not in the interest of Aboriginal Community Benefit Fund Entities (ACBF Entities), instead standing to benefit Pattenden and Law.
Furthermore, ASIC alleges insuring with Crown left customers vulnerable to unaffordable premium increases with Aboriginal people continuing to make premium payments to ACBF whilst being unaware of the risks to the viability of the funds.
"First Nations people took up policies with ACBF to ensure their family members had cover for their funeral expenses," Court said.
"The payments to Crown impacted the viability of the ACBF Entities and put at risk their ability to meet their commitments to members. Directors and officers must comply with their obligations, particularly when it comes to conflicts of interest."
In a separate proceeding, ASIC alleged ACBF caused "substantial harm" to First Nations people by falsely representing that it was owned or managed by Indigenous people, hinting through advertising that its funeral insurance was approved by Aboriginal communities.
(Koori Mail)
In October 2020, ASIC commenced proceedings in the Federal Court against ACBF Funeral Plans Pty Ltd and Youpla Group Pty Ltd for alleged misleading and deceptive conduct. The judgment has been reserved
Ms Waight said VALS is pleased civil proceedings are going ahead against the Youpla directors.
"This will provide some accountability for the company's reprehensible conduct. We hope this also puts directors of other funeral companies on notice that they will be held to account for breaches of the law," she said.
"However, this civil action isn't going to help our community. If ASIC is successful, the directors will be forced to pay penalties to the government but not to our community members.
"Our community feel like what happened to them was criminal and the punishment that should follow should not be limited to civil action. Those that lost thousands of dollars to a company that misleadingly held itself out to be community controlled need to be compensated."
Last year, the federal government established a scheme that pays for the funerals of anyone who had a policy with Youpla as of April 1, 2020. However, it will run out in November this year.
In May, Minister for Indigenous affairs, Linda Burney, said she was carefully considering the government's next steps after meeting with advocates for the company's former customers.
"The government is carefully considering further actions – we are deeply aware of the need to develop a solution that brings a longer-term resolution to those people impacted by Youpla's collapse," Ms Burney said in a statement.
Over 200 funerals have so far been paid for by the government's interim scheme.
The first case management hearing for ASIC is listed for 7 September 2023.
Breaches of director's duties can attract a maximum penalty of $200,000 for each breach that occurred in the period 2017 to 12 March 2019.
If you have been impacted by the Youpla collapse, an application for the Youpla Group Funeral Benefits Program to help the families of fund members affected by the collapse is available at the link below.
https://treasury.gov.au/youpla
Alternatively you can call 1800 296 989 or email [email protected]
