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Holden, Mark --- "A Monster with Aboriginal Camouflage: The Fall of Acbf and Rise of the Save Sorry Business Coalition" [2023] PrecedentAULA 51; (2023) 178 Precedent 10

A monster with Aboriginal camouflage: The fall of ACBF and rise of the Save Sorry Business Coalition

By Mark Holden

‘The predictable collapse of Youpla after 30 years of regulatory failures left a trail of harm, trauma, and intergenerational debt with First Nations bodies lying in morgues for weeks with no funds for Sorry Business, despite years of sacrificial saving.’^[1]

Bettina Cooper, First Nations Financial Counsellor and Save Sorry Business Coordinator

The Aboriginal Community Benefit Fund (which took different names and was made up of many companies but is referred to throughout this article as ACBF) was seen by consumer advocates and some regulators as a stalking beast of a scam.^[2] Prowling through First Nations communities for decades, it enveloped the most vulnerable of consumers by preying on the cultural need for Sorry Business – traditional funeral rites – and camouflaging itself as an Aboriginal organisation consumers could trust. ACBF exploited the First Nations community for 30 years for its own personal profit. It slipped through regulations and regulators and was cruel and ruthless to consumers who complained, and to consumer advocates.

I have worked on First Nations legal issues for over 15 years in the community legal sector as well as in the government sector. I am passionate about First Nations consumer issues as these consumers are more likely to be targeted by predatory businesses, which can make matters worse.

In March 2022, the ACBF beast collapsed into a liquidated scum, leaving behind hundreds of boxes in a basement and tens of thousands of angry and hurt consumers.

This article will briefly explore the history of ACBF’s business and the response from regulators over the years. This story does not have a pleasant outcome and shows some harsh history. But it also shines a light on the work of First Nations’ advocates, which has resulted in a reckoning for regulators and hopefully a new mindset towards First Nations’ consumer affairs.

CREATING A MONSTER: THE BONES OF THE BEAST

ACBF was established as a company in 1992 through the work of Englishman Ron Pattenden, who formed a funeral fund (Fund 1). Members made payments to Fund 1 each fortnight and the money was held in trust in Australia. When members passed away, their nominated beneficiaries received a set benefit amount from the fund to pay for the funeral. Fund 1 was regulated by NSW Fair Trading under the Funeral Funds Act 1979 (NSW) (Funeral Funds Act).

In 1994, ACBF No 2 Pty Ltd (Fund 2) was established. The crucial difference was that the trust deed for Fund 2 required the payments to be made towards a reinsurance scheme. The usual payments made to Fund 2 were diverted to a reinsurer (initially National Mutual, but more on this later). The reinsurer received the claim from Fund 2 and decided if the payment should be made.

ACBF’s marketing model was aimed squarely at First Nations peoples. First Nations Sorry Business is very culturally significant and sending off loved ones can be expensive. A full burial service can cost up to $20,000;^[3] First Nations funerals are more expensive for various reasons including remote living, moving the body to traditional lands and hosting extended family members from across the country (many separated by past stolen generations).

ACBF appears to have known of this cultural need and created a marketing strategy to cater to First Nations peoples. ACBF used different tactics to create a First Nations vibe, including:

• Aboriginal themes and motifs in graphic designs.

• Aboriginal stick figures in logos.

• Promoting the business name ‘Aboriginal Community Benefit Fund’ or ‘Aboriginal Community Funeral Plan’.

• Use of First Nations people in their advertising.

• Use of First Nations or dark-skinned sales representatives.

• Encouraging customers to sign up their family members under the same misleading tactics.

Many First Nations consumers trust First Nations organisations more because of their connection to and understanding of the community. Organisations like the Aboriginal Legal Service and Aboriginal Medical Service are First Nations owned and operated, and have worked hard to earn the community’s trust. Clients interviewed reported their belief that ACBF was Aboriginal owned and operated because of the above marketing.

‘I heard a knock at the door. I answered the door and saw two men standing outside. One looked Aboriginal and the other looked White and both were wearing a shirt with a little badge on them that looked like some black figures holding hands in front of a sun.

I thought they were Aboriginal because of the name and the logo. I chose to go with them because I trusted Aboriginal organisations.’

ACBF client statement (deidentified)

ACBF representatives capitalised on the high First Nations infant mortality rate and went after First Nations children, some as young as three months. Many clients were asked by representatives if they had children and emphasised the need to have funerals ready for children too. Many First Nations parents have experienced Sorry Business for children and wanted their children’s funerals paid for as well.

Many ACBF members did not realise that, as they got older, they had to make higher payments to ACBF’s fund. They had to keep making payments until the day they died and in doing so could pay more than the benefit amount. If they missed four payments in a calendar year, their membership was cancelled and they missed out entirely. Because of the higher payments required of older members and lower income of those surviving on a pension, there was a high rate of cancellation – and all the money stayed with ACBF. Essentially, ACBF clients were set up to fail.

ACBF had no First Nations directors until late 2018 and remained silent in its publications as to who the actual owners were. There were never any profiles of ACBF’s leaders, only their First Nations sales representatives. It seems ACBF’s marketing had the effect of misleading First Nations consumers into believing they were a First Nations owned and operated business when they were not.

ASIC caught on to this marketing method in 1999 when ACBF were selling door-to-door in the Northern Territory and ASIC commenced legal proceedings against them. The proceedings were dropped after ACBF entered into undertakings with ASIC, including participating in a compliance program and using the following disclaimer in their letter footers:

‘The Funds are not connected with or sponsored by any governmental or any similar body or Aboriginal organisation’.

None of our clients knew about this disclaimer or understood its effect. The wording was too difficult to understand, compared to the dominant representation in ACBF’s marketing described above.

ASIC commenced proceedings against ACBF Funds 1 and 2 again in the early 2000s for breaching the anti-hawking provisions under the Corporations Act 2001 (Cth). ACBF retorted that they were not a financial product as they were exempted as a funeral expenses policy under the Corporations Regulations 2001 (Cth).^[4] The Federal Court disagreed in their decision dated 5 March 2004^[5] and found Funds 1 and 2 were indeed financial products and not funeral expense policies.^[6] The critical fact in this decision was that the benefits could be used for anything, while funeral expense policy payments could only be used for funerals. ACBF then agreed to no longer sell Fund 1 and 2 memberships without an Australian Financial Services Licence.

Instead, in 2005, ACBF spawned ACBF Funeral Plans Pty Ltd (Fund 3). Fund 3 allowed members to be plan holders and pay for each nominee listed for benefits. The payments still needed to be paid to a reinsurer. But this time, the payouts could not be used for anything but funerals. If there was any leftover benefit not used for funerals, it was allegedly paid to charity.

Fund 3 was exempt and no action was taken to amend the Corporations Regulations 2001 (Cth). It appears that at the time, ASIC could not see a way to take on ACBF as a business without it going under, and there was no suitable replacement. It may have seemed more logical back then to negotiate with the beast and set out compliance conditions than to take it by the horns – leaving First Nations people with something scrappy rather than nothing.

ACBF GETS CENTREPAY: THE BEAST’S MUSCLE

ACBF being registered with Centrepay gave the beast its muscle. Centrepay allows registered businesses to deduct part of a Centrelink benefit before it goes to the recipient’s bank account. Centrepay was introduced in 1999 and reserved for rent and utilities – the essentials.

In February 2001, ACBF was registered as a business that could utilise Centrepay, which guaranteed income for ACBF and kept consumers locked into payments even when it caused financial hardship. ACBF’s registration with Centrepay gave First Nations consumers an impression that the federal government endorsed ACBF as an essential service.

The Centrepay registration incentivised ACBF to market to vulnerable First Nations consumers living on meagre benefits. Sales representatives were walking around with Centrepay forms eager to get the consumer’s customer reference number and signature to keep them paying into deeper hardship.

ACBF’S NEW REINSURER: THE BEAST’S BRAIN

ACBF’s reinsurer was originally National Mutual who made the payouts to beneficiaries. However, by the early 2000s, ACBF were no longer reinsured by National Mutual. It would have been easier for ACBF to have their own reinsurer who could process claims much faster and with fewer regulatory requirements.^[7] In 2002, Crown Insurance Services Ltd (Crown) was set up in Vanuatu under Vanuatu corporations law. One of the directors of Crown was listed as the now former ACBF director, Ron Pattenden. Crown received the money and made the decisions on paying the beneficiaries. Crown keeping the money overseas made it very difficult to recover.

The ATO tried to tax Crown for the income received from Australia. However, due to corporate structuring, the AAT and the Federal Court on appeal concluded that the income was indirectly sourced from Australia and not taxable.^[8]

THE BEAST BREAKS: WHAT CAUSED THE DOWNFALL?

With a ruthless marketing model targeting vulnerable consumers ina poorly regulated business, government endorsement for guaranteed payments and an overseas base to keep them in, ACBF was standing tall making millions each year on the backs of the most vulnerable and disadvantaged of consumers.

However, all beasts are hunted down or die from old age. In this case, it was both.

Centrepay

It was not until 1 February 2017, following intense lobbying, government reviews and litigation^[9] that ACBF was deregistered from Centrepay and stopped receiving Centrepay payments. After this, over 6,000 consumers lost their memberships either because they were not contactable for direct debit arrangements or they never could have afforded the payments in the first place. ACBF kept that money.

Marketing and business model

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2018 exposed ACBF’s marketing and found its marketing practices to be misleading under the Australian Securities and Investment Commission Act 2001 (Cth).^[10] After this, hundreds of current and former ACBF consumers came forward and sought a refund for the company’s misrepresentation of Aboriginality. These consumers lodged complaints with the Australian Financial Complaints Authority (AFCA). Every single one of the 178 AFCA determinations until ACBF’s collapse were in favour of the complainants.

This effectively destroyed ACBF’s goodwill in First Nations communities. Even when ACBF changed their disclaimer to state they were not an Aboriginal organisation, appointed two First Nations directors and changed their business name to ‘Youpla’, it did not turn the tide of public opinion against them.

The Royal Commission also recommended in their final report in February 2019 that the funeral expenses exemption be removed from the Corporations Regulations 2001 (Cth). This exemption was removed in an amendment effective on 1 April 2020 and ACBF required an Australian Financial Services Licence to get new customers. It was never able to secureone.

The reinsurer

In August 2018, NSW Fair Trading wrote to ACBF expressing their views that Fund 3 making payments to Crown might be in breach of s22 Funeral Funds Act (investment of surplus funds).^[11] ACBF agreed to stop making payments to Crown; the last payment was in early 2020. However, this activated a clause in the trust deed for Fund 2 and Fund 3 whereby the trust ended if a reinsurance scheme could not be secured. With no financial service wanting to touch ACBF with a 10-foot pole, ACBF started to collapse.

At that stage, many of the ACBF directors who oversaw its operations jumped ship. This included Ron Pattenden in December 2018 after the Royal Commission.

However, ASIC rose to the challenge and filed civil penalty proceedings on 30 September 2023 against five of the former directors, including Ron Pattenden.^[12] ASIC allege these former directors, between September 2017 and November 2018, maintained insurance arrangements with Crown that were not in the best interests of ACBF members and stood to benefit Crown directors Ron Pattenden and Jonathan Law. ASIC further allege that insuring with Crown left the ACBF entities vulnerable to unaffordable premium increases and the members were unaware of the risks to the funds’ viability. ASIC is seeking declarations of contraventions of ss 180, 181 and 182 of the Corporations Act 2001 (Cth), pecuniary penalty orders and orders disqualifying the defendants from managing corporations. Such proceedings are rare, but send a strong message that any businesses out there harming First Nations communities will not be tolerated: ASIC will pursue you, even if you leave the company.

SIFTING THROUGH THE REMAINS

On 10 March 2022, ACBF went into liquidation and thousands of memberships became obsolete. Consumer advocates across the country were inundated with hundreds of angry, confused and distressed callers. Many of these callers were Elders who made their payments to ACBF for decades so they could ease the burden on their family – these Elders were in tears about what to do for Sorry Business. There was no adequate emergency relief. The best people could get was a $1000 grant from their local Aboriginal land council or charity.

The appointed liquidators, SV Partners, have been working through the 500 plus boxes of membership documents and financial records to look at where the money has gone. To date, Fund 1 is the only fund with substantial assets within it. This is because the other funds were being paid to Crown every year, leaving very little in behind.

The financial records have given SV Partners cause for concern. SV Partners have now reported to ASIC several possible breaches of directors’ duties after discovering millions of dollars funnelled out to different companies owned by former ACBF directors, including Crown. On 8 December 2022, ASIC sought and received orders from the NSW Supreme Court to appoint a special liquidator to investigate all of the former directors. At the time of writing, the investigation is ongoing.

PUSHING ON WITH STRENGTH FROM FIRST NATIONS

Normally, when a company collapses and the liquidators have disbursed the assets to creditors, there is nothing more that can be done – the world moves on. However, ACBF’s collapse ignited a blazing question in many consumers and advocates: how did this go on for so long?

If ACBF was:

• properly regulated, especially after Fund 3 was created;

• not registered for Centrepay in 2001;

• pursued for systemic misrepresentation in the beginning; or

• not allowed to move funds overseas against the Funeral Funds Act to Crown,

would we be here in the first place?

The collapse of ACBF and the calls of thousands of consumers resulted in the Save Sorry Business Coalition (SSBC) – a First Nations led group made up of consumer advocates who have dealt with ACBF and lobbied the government to respond to this crisis. Coordinated by Boandik woman Bettina Cooper and supported by peak level consumer bodies and experts, the SSBC lobbied the federal government to provide relief to those affected by ACBF’s collapse. This was done through a well-executed communications strategy to explain the history of ACBF and collect human stories, deep research on the legal issues behind ACBF condensed into plain language and infographics, and engaging with several government bodies, MPs and ministers to build solutions

In July 2022, the newly appointed Minister for Aboriginal and Torres Strait Affairs Linda Burney and Minister for Financial Services and Assistant Treasurer Stephen Jones made two important announcements:

• The Youpla Group Funeral Benefits Program – to pay the benefit amount for any deceased member who was still a member up until 1 April 2020.^[13] This scheme will remain open until 30 November 2023.

• An enduring solution – a large-scale solution for the remaining people impacted. Details are yet to be released.^[14]

Our Coalition have raised repeatedly with the federal government their role in providing ACBF with a vehicle for financial abuse through Centrepay and their responsibility. We have also raised the importance of giving those impacted the right to choose different cultural options to suit their needs including returning their payments.

MOVING FORWARD: THE LESSONS WE NEED TO TAKE TO HEART

The scourge of ACBF has left a deep scar in many hearts that will take generations to heal. However, it has given us strong and lasting lessons on what we must do as advocates to support First Nations peoples:

1. ACBF is an example of one of many potential systemic business practices out there hurting First Nations communities. These complaints always start at the consumer level, with those who experience it first.

2. Invest in your community to learn what is going on and to build trust – build relationships with local services and community groups to explain what you can provide and listen to what they can tell you about what they see.

3. There has to be a safe alternative to meet client and community needs and any potential resolution must begin with the community from the ground up. Targeted businesses attract their customer base because they appeal to a need. Effective resolution requires an effective alternative product or service to stop other businesses from engaging in systemic breaches of the law.

Mark Holden is a Dunghutti man working as the senior solicitor and policy officer at the Financial Rights Legal Centre’s Mob Strong Debt Help program. Mark believes all First Nations consumers must have the right to make decisions with free, prior and informed consent. EMAIL mobstrong@financialrights.org.au.

^[1] In conversation with the author.

^[2] L Allam ‘Asic seeks record $7.5m penalty against ACBF-Youpla for alleged deceptive and misleading conduct’, The Guardian (23 November 2022) <https://www.theguardian.com/australia-news/2022/nov/23/asic-seeks-record-75m-penalty-against-acbf-youpla-for-alleged-deceptive-and-misleading-conduct>.

^[3] ACCC, Funeral Services Sector (Report, December 2021) 4 <https://www.accc.gov.au/about-us/publications/funeral-services-sector-report-1>.

^[4] Reg 7.1.07D).

^[5] Australian Securities & Investments Commission v Aboriginal Community Benefit Fund Pty Ltd [2004] FCA 178.

^[6] Ibid [59].

^[7] Crown Insurance Services Limited and Commissioner of Taxation [2011] AATA 847, [14].

^[8] Federal Commissioner of Taxation v Crown Insurance Services Ltd [2012] FCAFC 153.

^[9] Chief Executive Centrelink v Aboriginal Community Benefit Fund Pty Ltd [2016] FCAFC 153. The Court found the Chief Executive Officer for Centrelink did indeed have powers to amend the Centrelink rules to remove ACBF as a registered business, [20].

^[10] Commonwealth of Australia, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Vol 2: Case studies (Interim report, 2018) 452. <https://www.royalcommission.gov.au/system/files/2020-09/volume-2.pdf>.

^[11] A Bainbridge, L Florance and K Wellauer, ‘The inside story of the Aboriginal Community Benefit Fund collapse and the missing millions’ ABC News (26 May 2022) <https://www.abc.net.au/news/2022-05-26/aboriginal-community-benefit-fund-youpla-and-missing-millions/101003884>.

^[12] ASIC, ASIC launches proceedings against five Youpla Group directors (Media Release, 31 August 2023) <https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-237mr-asic-launches-proceedings-against-five-youpla-group-directors/>.

^[13] The Treasury, Youpla Group Funeral Benefits Program <https://treasury.gov.au/youpla>.

^[14] Transcript of Joint Media Conference, Canberra (25 July 2022) <https://ministers.treasury.gov.au/ministers/stephen-jones-2022/transcripts/joint-media-conference-canberra>.