Insurance

Yachts and mansions: founding father of firm that left hundreds of Aboriginal folks out of pocket made greater than $20m, tax-free | Youpla/ACBF funeral fund

The founding father of a funeral insurance coverage firm that focused weak Aboriginal households and collapsed, leaving hundreds of principally low-income folks with out the means to pay for his or her funerals, collected greater than $20m in tax-free revenue from the enterprise by way of a fancy net of offshore corporations.

The New Zealand-based businessman Ron Pattenden amassed the thousands and thousands from the operations of the Aboriginal Neighborhood Profit Fund (ACBF), later known as Youpla, over 10 years from 2010, and continued to make cash from it even after he offered it to new operators, Guardian Australia can reveal.

Pattenden has amassed vital private wealth, together with a luxurious yacht named Dream Catcher, a high-end fishing and boating resort in Vanuatu and a number of blue-chip properties in New Zealand. That is in stark distinction to experiences that because the firm went below in March, a few of ACBF-Youpla’s policyholders have needed to depart the our bodies of kin within the morgue for weeks whereas they increase the cash to pay for a funeral.

Guardian Australia has seen paperwork that it understands are within the possession of Australian and New Zealand authorities, and used public information and different sources, to hint the historical past of Pattenden’s involvement with the corporate.

Pattenden has obtained funds from ACBF-Youpla in 3 ways over time. Whereas he was proprietor, he was paid dividends as a shareholder and considered one of his Vanuatu corporations, Crown Insurance coverage Providers, was paid premiums for insurance coverage. After he offered the enterprise to new operators in late 2018, he continued to obtain cash as instalments on the acquisition value.

The previous liquidator of considered one of Youpla’s funds, Roland Robson, raised issues in a late 2021 report back to collectors filed with the company regulator that Pattenden might have misappropriated cash from it.

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What’s ACBF/Youpla?

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What’s ACBF/Youpla

    • The Aboriginal Neighborhood Profit Fund (ACBF) was a Gold Coast-based personal enterprise that for many years aggressively offered funeral insurance coverage virtually solely to Aboriginal folks, together with youngsters and infants
    • At its peak ACBF had about 25,000 shoppers. Buying and selling as Youpla, it had 13,000 shoppers on the time of liquidation, all of whom face shedding  the cash they paid in
    • Contributions of lively members to the three funds totalled $39.2m 
    • The liquidator, SV Companions, says there may be simply $11.9m left – the biggest fund (Fund 3) has simply $207,000 
    • ACBF-Youpla was investigated by NSW’s Division of Honest Buying and selling in 1992 and by the monetary providers regulator, Asic, in 1999, 2004 and 2014, however the enterprise was allowed to proceed
    • The corporate grew to become a case examine on the banking royal fee in 2018
    • Adjustments carried out following the royal fee led to Youpla being unable to promote to new prospects and not using a licence
    • The monetary ombudsman, Afca, has obtained 700 complaints about Youpla group since 2018, and issued 178 choices to this point, all in favour of complainants citing deceptive or misleading conduct 
    • Afca estimates it has awarded greater than $1.4m in compensation, however 61 determinations remained unpaid, value round $500,000

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“My enquiries with the present administrators of the corporate revealed that the previous director of the corporate [Pattenden] might have misappropriated a considerable amount of the corporate’s funds by the best way of the dividend fee to himself or associated entities over a lot of years,” Robson stated in a report into the affairs of Youpla’s Fund No 2, which collapsed in December. The allegation is in a bit of the report inspecting whether or not sure funds made by the corporate could be clawed again to pay collectors.

Pattenden didn’t reply to detailed questions in regards to the points raised on this report and it’s not recognized if he disputes the allegation.

ACBF’s collapse in March took with it a lot of the premiums paid by its Aboriginal policyholders, leaving them with out funeral protection and going through the lack of all the things they’d paid into the scheme.

The Guardian has seen paperwork that counsel Pattenden, who based ACBF within the early Nineteen Nineties, was eager to affect the affairs of the enterprise when he was not a director, together with by demanding larger premiums for Crown and suggesting the corporate’s new house owners slash prices in an effort to recoup what the corporate owed him.

In September 2017 Crown gave ACBF directions to double the premiums it was charging “payers & nominees efficient from 1st August 2017”.

“This resolution is being made attributable to payer larger threat elements,” Crown director Jonathan Regulation, considered one of Pattenden’s Vanuatu-based accountants, stated in a 4 September 2017 letter to ACBF.

Ron Pattenden’s yacht Dream Catcher at Gulf Harbour marina, Whangaparoa.
Ron Pattenden’s yacht Dream Catcher at Gulf Harbour marina, Whangaparāoa. {Photograph}: Fiona Goodall/The Guardian

A whole lot of complaints

ACBF-Youpla was a personal enterprise primarily based on the Gold Coast that for many years offered low-value funeral insurance coverage to Aboriginal folks, together with youngsters and infants, utilizing aggressive gross sales ways and falsely giving the impression it was an Aboriginal organisation.

Through the years, ACBF-Youpla fought quite a few authorized battles with NSW and federal regulators, a few of which resulted in rulings that it was partaking in deceptive and misleading conduct in the best way it marketed its funeral bills insurance policies to Indigenous folks.

It additionally survived a call by the federal authorities in 2014 to stop it taking automated deductions from folks’s Centrelink funds. ACBF misplaced 6,000 prospects in consequence, chief government Bryn Jones advised the monetary providers royal fee in 2018. However as a result of the policyholders then defaulted on common repayments, ACBF acquired to maintain the cash they’d put in.

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The corporate’s look earlier than the royal fee into banking and monetary providers in 2018 put it into the general public highlight and despatched it right into a downward spiral.

In his interim report, commissioner Kenneth Hayne stated ACBF might have engaged in deceptive and misleading conduct by holding itself out as an Aboriginal organisation that was endorsed by the group. He stated the corporate had fallen under group requirements and expectations in a lot of methods, together with by promoting insurance coverage to youngsters.

Hayne stated ACBF fell under group expectations by promoting a “low worth product” the place prospects obtained simply 13% of the premiums they paid – the bottom share found in a survey carried out by the company regulator.

Since 2018 the newly established Australian Monetary Complaints Authority (Afca) has obtained 700 complaints about ACBF-Youpla. It has made 176 determinations, all in favour of the complainants, citing “misleading and deceptive” and “unconscionable” conduct. Afca estimates it has awarded $1.4m value of refunds to shoppers of ACBF-Youpla, which it says nonetheless owed $500,000 in unpaid refunds on the time of liquidation.

After the royal fee, client advocates repeatedly warned governments that ACBF-Youpla was teetering, and that if it have been to go broke hundreds of individuals can be left excessive and dry.

The luxury block at Gulf Harbour on the Whangaparoa peninsual, north of Auckland, where Ron Pattenden has an apartment.
The posh block at Gulf Harbour on the Whangaparāoa peninsula, north of Auckland, the place Ron Pattenden has an condominium. {Photograph}: Fiona Goodall/The Guardian

In October final 12 months, the Australian Securities and Investments Fee (Asic) launched authorized motion in opposition to ACBF-Youpla, accusing it of deceptive and deceiving prospects through the use of advertising materials that painted it as an Aboriginal organisation and by promising a lump sum fee at time of loss of life, when in reality solely funeral bills have been lined. For the reason that collapse of the group this litigation has been placed on maintain.

By the point ACBF was hauled earlier than the royal fee in 2018, Pattenden was now not formally concerned within the firm. However paperwork seen by Guardian Australia counsel he was nonetheless eager to exert affect over its affairs, apparently to make sure it may proceed to pay moneys it owed to him.

‘Reduce on staffing’

Pattenden didn’t seem earlier than the royal fee when it sat in Darwin in July 2018 to look at the affairs of ACBF.

As an alternative, the new seat was occupied by Jones, an ACBF director. Counsel helping the fee, Rowena Orr QC, subjected him to a withering cross-examination over the corporate’s enterprise practices, in addition to allegations that it represented itself as Aboriginal-owned when it was managed by white folks.

Regardless of the general public battering, Jones and his group went on to purchase ACBF from Pattenden, formalising the deal in November 2018.

Bryn Jones from ACBF outside the royal commission in Darwin, in 2018.
Bryn Jones from ACBF exterior the royal fee in Darwin, in 2018. {Photograph}: Glenn Campbell/AAP

Pattenden agreed to bankroll the sale himself, accepting repayments by instalment. As well as, Jones and his consortium of patrons agreed to make use of any surplus cash within the enterprise to pay him again.

However within the wake of the royal fee, the federal authorities and the company regulator, which had for many years let ACBF keep it up enterprise, had lastly had sufficient. In February 2019 they introduced they’d shut the legislative loophole which had allowed ACBF to function and not using a monetary providers licence (as really useful by the fee), constricting its capacity to show revenue. In emails to the administrators, Pattenden was eager for the corporate to attempt to get a licence, apparently to make sure they may pay again cash owed to him.

“How far-off do you assume the AFSL licence will take to realize or to have the ability to function below,” he requested in his letter of April 2019. “Have you ever acquired gross sales lined up within the pipeline and what number of, I’m listening to this could possibly be a big quantity.”

He additionally complained in regards to the lack of any surplus funds by the corporate to him.

“Might you clarify the rationale for not even a greenback further over the minimal quantity payable off the sale mortgage quantity.”

ACBF has been unsuccessful in its makes an attempt to get a licence.

Pattenden expressed frustration that the corporate was struggling to remain solvent, apparently nervous about its capacity to pay his corporations what was owed.

“Because the financier with three million on the road there are lots of questions I would like solutions to that I’m legally entitled to ask … you may have a authorized obligation to report and replace me on vital adjustments within the enterprise, the Firm’s monetary state, once more I say at current I’m being advised nothing,” Pattenden wrote on 19 April 2019.

“From what I’m listening to and now don’t have any say in the way you run the businesses, I can solely counsel and suggest you take a look at and cut back your overheads dramatically, authorized charges are astronomical, however perceive a few of these can’t be prevented.

“Reduce on staffing till you may have the revenue coming in by way of gross sales to warrant them, i.e. make redundant all lifeless wooden.”

The consortium made 15 “repayments” to Pattenden, however stopped abruptly after claiming that Youpla had overpaid Crown, Pattenden’s different firm, in a separate transaction for insurance coverage premiums. Pattenden rejected the thought Crown owed Youpla cash as “somebody’s fallacious idea” and instructed Youpla as a substitute pay Crown from a “$300,000 slush fund” it held. This fund was held as a buffer to permit the corporate to pay out rapidly to Aboriginal households for funeral bills.

Kuku Yalanji elder Daphne Naden at her home in Mossman, Queensland. She is one of thousands who were left without the money to pay for funerals after ACBF’s collapse.
Kuku Yalanji elder Daphne Naden at her house in Mossman, Queensland. She is considered one of hundreds who have been left with out the cash to pay for funerals after ACBF’s collapse. {Photograph}: Brian Cassey

Pattenden instructed ACBF didn’t have to have a lot cash to pay claims as a result of the variety of prospects it had was dwindling – and instructed that in future, he would possibly ask for extra.

“Being the numbers have dropped so dramatically and the claims should not so excessive, Crown could also be requesting 50% of those monies be returned till such time the total quantity is warranted,” Pattenden stated within the letter.

A battle over tax

In earlier years, ACBF-Youpla had been profitable. Earlier than 2001, when it held insurance coverage with Axa, the French multinational was making greater than $300,000 from the $1m a 12 months ACBF paid in premiums.

However in March 2001, Axa pulled its protection, telling ACBF that “persevering with the connection between AXA and ACBF won’t be in both AXA’s or ACBF’s, or extra importantly within the ACBF members’ greatest pursuits”.

Pattenden couldn’t discover one other insurer to tackle ACBF, so in 2002 he arrange his personal – Crown – primarily based in Vanuatu, the place insurance coverage corporations wanted solely $200,000 in capital, in contrast with the $5m required in Australia.

Crown stepped into Axa’s footwear. ACBF paid Crown premiums, and in return Crown funded the advantages that ACBF paid when members died.

Pattenden resigned as a director of ACBF in 2002, though he continued to personal a lot of the firm.

Nonetheless, the Australian Taxation Workplace didn’t like the brand new insurance coverage association.

The ATO contended that Crown was a part of the identical group and was doing enterprise in Australia. In 2008, after a five-year investigation, it slugged Crown and Pattenden with tax payments of a minimum of $6.4m – later media protection put the whole at $15m – and banned him from leaving the nation.

Pattenden fought again, ultimately succeeding within the federal court docket in overturning the departure prohibition order. In November 2011, the Administrative Appeals Tribunal additionally present in his favour, ruling that Crown was not doing enterprise in Australia and subsequently didn’t have a tax invoice to pay there.

In March 2010, he launched into a fancy restructuring of his enterprise empire that resulted in possession of ACBF and Crown shifting from him personally to Simply Options.

Pattenden then offered his shares in Simply Options to a brand new Vanuatu firm he additionally managed, Bu Teck.

The acquisition value was $29.8m, however Pattenden didn’t obtain any cash on the day. As an alternative, the quantity was handled as a mortgage from Pattenden to Bu Teck. The impact was to remodel the streams of dividends from ACBF and the earnings from Crown’s insurance coverage premiums into repayments of a mortgage, rendering them free from tax. Because of this, over the last decade between 2010 and 2020, Pattenden obtained virtually $21m that in the end got here from ACBF prospects, and was capable of legally keep away from paying any tax in NZ, Australia or Vanuatu.

The restructuring additionally made Pattenden a managing director of ACBF once more, in line with paperwork seen by the Guardian.

A memorandum of understanding from 26 March 2010, signed by Pattenden on his personal behalf and as director of Simply Options, information: “Simply Options Restricted undertakes to make sure Ron Pattenden stays as managing director of Aboriginal Neighborhood Profit Fund till such time as he’s unwilling or unable to proceed.”

Given his earlier dealings with the ATO, Pattenden was conscious that any suggestion Crown was telling ACBF what to do could possibly be an issue. He additionally obtained recommendation in 2013 that Crown “can’t be working a enterprise in Australia” with out risking tax and warning him in opposition to sending an affiliate to fulfill ACBF in Australia, with directions from Crown.

Can any cash be retrieved?

By 2019, the federal opposition, Asic and NGOs who had been supporting a few of the hundreds of nervous Aboriginal policyholders, all expressed issues about ACBF-Youpla’s solvency throughout the three funeral funds it was working.

Even because the place of the funds worsened, it continued to pay insurance coverage premiums attributable to Crown. Crown obtained a complete of $1.27m in premiums from Youpla in 2019 and 2020, firm accounts present.

Fund No 2 collapsed in November final 12 months, and the opposite two adopted in March. Now, greater than 13,000 folks have doubtless misplaced all that they’ve paid into the fund, because the liquidators choose by way of what’s left.

In a report back to collectors in March, the group’s liquidator, David Stimpson, stated he was “conscious of allegations of funds transferred improperly out of the group”.

“These allegations will probably be investigated and restoration motion pursued if acceptable,” he stated in his report. He stated he had begun gathering information “to correctly decide if monies have been improperly transferred out of the group, the greenback worth concerned and the prospects of recovering some or all of these funds”.

Requested by Guardian Australia about transfers of cash to Pattenden’s Vanuatu corporations, he stated these can be “a part of an intensive investigation that’s being undertaken”.

He expects the investigation to take greater than a 12 months.

“There are investigations to be carried out, authorized recommendation on a lot of issues to be obtained, court docket functions and probably litigation to undertake to recuperate funds into the administration,” he stated.

“These all, inherently, take time.”

Within the meantime, Stimpson is looking for funding to cowl present claims.

“I can’t let you know the place the funding will/might come from, however I’m multiple avenue for funding and am hopeful it should come collectively quickly,” he stated.

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