Yachts and mansions: founder of company that left thousands of Aboriginal people out of pocket made more than $20m, tax-free

The founder of a funeral insurance company that targeted vulnerable Aboriginal families and collapsed, leaving thousands of mostly low-income people without the means to pay for their funerals, collected more than $20m in tax-free income from the business through a complex web of offshore companies.

The New Zealand-based businessman Ron Pattenden accumulated the millions from the operations of the Aboriginal Community Benefit Fund (ACBF), later called Youpla, over 10 years from 2010, and continued to make money from it even after he sold it to new operators, Guardian Australia can reveal.

Pattenden has received payments from ACBF-Youpla in three ways over the years. While he was owner, he was paid dividends as a shareholder and one of his Vanuatu companies, Crown Insurance Services, was paid premiums for insurance. After he sold the business to new operators in late 2018, he continued to receive money as instalments on the purchase price.

Pattenden did not respond to detailed questions about the issues raised in this report and it is not known if he disputes the allegation.

ACBF-Youpla was a private business based on the Gold Coast that for decades sold low-value funeral insurance to Aboriginal people, including children and babies, using aggressive sales tactics and falsely giving the impression it was an Aboriginal organisation.

Over the years, ACBF-Youpla fought numerous legal battles with NSW and federal regulators, some of which resulted in rulings that it was engaging in misleading and deceptive conduct in the way it marketed its funeral expenses policies to Indigenous people.

In his interim report, commissioner Kenneth Hayne said ACBF may have engaged in misleading and deceptive conduct by holding itself out as an Aboriginal organisation that was endorsed by the community. He said the company had fallen below community standards and expectations in a number of ways, including by selling insurance to children.

After the royal commission, consumer advocates repeatedly warned governments that ACBF-Youpla was teetering, and that if it were to go broke thousands of people would be left high and dry.

In October last year, the Australian Securities and Investments Commission (Asic) launched legal action against ACBF-Youpla, accusing it of misleading and deceiving customers by using marketing material that painted it as an Aboriginal organisation and by promising a lump sum payment at time of death, when in fact only funeral expenses were covered. Since the collapse of the group this litigation has been put on hold.

By the time ACBF was hauled before the royal commission in 2018, Pattenden was no longer officially involved in the company. But documents seen by Guardian Australia suggest he was still keen to exert influence over its affairs, apparently to ensure it could continue to pay moneys it owed to him.

Despite the public battering, Jones and his group went on to buy ACBF from Pattenden, formalising the deal in November 2018.

Pattenden agreed to bankroll the sale himself, accepting repayments by instalment. In addition, Jones and his consortium of buyers agreed to use any surplus money in the business to pay him back.

But in the wake of the royal commission, the federal government and the corporate regulator, which had for decades let ACBF carry on business, had finally had enough. In February 2019 they announced they would close the legislative loophole which had allowed ACBF to operate without a financial services licence (as recommended by the commission), constricting its ability to turn profit. In emails to the directors, Pattenden was keen for the company to try to get a licence, apparently to ensure they could pay back money owed to him.

He also complained about the lack of any surplus payments by the company to him.

ACBF has been unsuccessful in its attempts to get a licence.

Pattenden expressed frustration that the company was struggling to stay solvent, apparently worried about its ability to pay his companies what was owed.

In previous years, ACBF-Youpla had been lucrative. Before 2001, when it held insurance with Axa, the French multinational was making more than $300,000 from the $1m a year ACBF paid in premiums.

Pattenden resigned as a director of ACBF in 2002, although he continued to own most of the company.

However, the Australian Taxation Office did not like the new insurance arrangement.

Pattenden fought back, eventually succeeding in the federal court in overturning the departure prohibition order. In November 2011, the Administrative Appeals Tribunal also found in his favour, ruling that Crown was not doing business in Australia and therefore did not have a tax bill to pay there.

In March 2010, he embarked on a complex restructuring of his business empire that resulted in ownership of ACBF and Crown moving from him personally to Just Solutions.

Pattenden then sold his shares in Just Solutions to a new Vanuatu company he also controlled, Bu Teck.

The restructuring also made Pattenden a managing director of ACBF again, according to documents seen by the Guardian.

Even as the position of the funds worsened, it continued to pay insurance premiums due to Crown. Crown received a total of $1.27m in premiums from Youpla in 2019 and 2020, company accounts show.

He expects the investigation to take more than a year.

In the meantime, Stimpson is seeking funding to cover existing claims.