The directors of a company that sold funeral policies to Indigenous people are being taken to court for allegedly failing their members.
The Australian Securities and Investments Commission (ASIC) on Thursday launched Federal Court proceedings against the Aboriginal Community Benefit Fund, also known as Youpla.
Former directors Ronald Pattenden, Jonathan Law and Michael Wilson, and executives Bryn Jones and Geoffrey Clayton have been individually named in the civil penalty proceedings.
It is alleged that between September 2017 and November 2018 the Youpla officials maintained insurance arrangements with Crown Insurance Services Limited, a Vanuatu-based company owned and controlled by Mr Pattenden and Mr Law.
The financial watchdog claims those arrangements were not in the interests of Youpla, and instead stood to benefit Mr Pattenden and Mr Law.
It is alleged that insuring with Crown also left Youpla vulnerable to unaffordable premium increases, with First Nations people continuing to make premium payments while unaware of the potential risks.
"ASIC's case seeks to hold to account those involved in the alleged governance failures," deputy chair Sarah Court said.
"Directors and officers must comply with their obligations, particularly when it comes to conflicts of interest."
ASIC is seeking declarations of contraventions under the Corporations Act, penalty orders and orders disqualifying the former directors from managing corporations.
The first case management hearing is listed for September 7.
Youpla sold the insurance policies to Indigenous people across Australia for decades, before coming to the attention of the 2018 banking royal commission and regulators.
The company collapsed in March last year, with more than 10,000 families losing out on their funeral plans.
The Victorian Aboriginal Legal Service welcomed the civil action, but said it wouldn't help victims.
"Our community feel like what happened to them was criminal and the punishment that should follow should not be limited to civil action," chief executive Nerita Waight said.
"Those that lost thousands of dollars to a company that misleadingly held itself out to be community controlled need to be compensated."
