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ASIC takes Youpla directors to court

The corporate regulator has launched court action against five former directors of funeral insurer Youpla Group, which used high pressure tactics to sell near-worthless products to mostly Indigenous customers, as exposed during the 2018 Hayne royal commission.

Youpla, formerly known as Aboriginal Community Benefit Fund (ACBF), collapsed last year and the Federal Government subsequently set up a redress scheme for affected Indigenous policyholders.

Australian Securities and Investments Commission (ASIC) Deputy Chair Sarah Court says the corporate regulator’s case “seeks to hold to account those involved in the alleged governance failures and director misconduct that impacted the First Nations people” who bought the funeral policies.

ASIC filed the civil penalty proceedings yesterday in the Federal Court, alleging first defendant Ronald Joseph Pattenden and the four directors breached their duties between September 2017 and November 2018 through insurance arrangements with a Vanuatu-registered company called Crown Insurance Services.

Mr Pattenden and second defendant Jonathan Glen Law both “beneficially owned and controlled” Crown, the insurer for Youpla’s ACBF entities from June 2002 until February last year. The other accused are director Michael Brendan Wilson, CEO Bryn Elwyn Jones and COO Geoffrey Peter Clayton.

“ASIC alleges those [insurance] arrangements were not in the interests of the Aboriginal Community Benefit Fund Entities and stood to benefit Pattenden and Law,” the regulator said today in a statement.

The ASIC concise statement filed to the Federal Court says the Crown policies were renewable annually and on September 4 2017 it was agreed that premiums paid to the Vanuatu company should be doubled.

“The ACBF entities were the sole customers of Crown,” the concise statement says, adding the “doubling of premiums significantly affected” the financial position of one of the entities.

ASIC alleges a “substantial reason” for making that decision to increase the premiums was to “gain an advantage” for Crown and in turn Mr Pattenden and Mr Law.

The regulator further alleges that insuring with Crown left the ACBF entities vulnerable to unaffordable premium increases.

“ASIC alleges the defendants maintained the arrangement with Crown which moved funds into an overseas company owned and controlled by two of the directors and did not act in the best interest of the ACBF Entities and members,” Ms Court said.

She says 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,” Ms Court said.

ASIC is seeking declarations of contraventions of the Corporations Act, pecuniary penalty orders and orders disqualifying the defendants from managing corporations.

The first case management hearing is listed for September 7.