The New York Times reported on Friday that a federal judge placed Uncle Nearest under receivership after its principal lender sued the company. The plaintiff of the lawsuit, Farm Credit Union, claims Uncle Nearest defaulted on loans and owes the company $108 million with interest. The lawsuit also named the company’s founder and CEO, Fawn Weaver, and her husband, former Sony Pictures Executive Keith Weaver. Both deny wrongdoing.
The Weavers allege that Uncle Nearest’s former CFO, Mike Senzaki, provided inaccurate information regarding barrel inventory without the company’s knowledge. Senzaki’s actions put Uncle Nearest in its current financial position.
“In other words, Defendants were, and are, victims of fraud — not perpetrators or conspirators,” an attorney for the Weavers alleges in the lawsuit.
Farm Credit claims that Uncle Nearest overvalued its whiskey inventory. The lender expresses that Uncle Nearest used barrels of whiskey as collateral for the purchase of a house on Martha’s Vineyard. The suit claims Uncle Nearest kept a cash balance significantly lower than the minimum of $1.5 million to maintain the loan.
‘Flat-Out Lie’: Fawn Weaver’s Response
The Weavers fear that the appointment of a receiver is going to do irreparable damage to the company. The judge issued a gag order after Fawn Weaver posted about the lawsuit on her social accounts. Weaver claimed that Uncle Nearest was “THE shining star, growing against impossible odds.” She offered sales statistics for key markets and claimed Nearest was doing well in spite of industry headwinds.
Uncle Nearest’s Founder and CEO Fawn Weaver claimed the ruling was a “not only inaccurate” but a “flat-out lie.” Both Weavers have claimed that should a receivership be appointed to the brand, The Uncle Nearest company might “become worthless.” As the face of the brand, Fawn expressed fears the move would alienate the brand’s customer base.
An Industry in Turmoil
Uncle Nearest is hardly the first brand to experience struggles this year, particularly within the craft whiskey sector. In April, the craft spirits gem of the Pacific Northwest, Westward Whiskey, filed for Chapter 11 bankruptcy protection, which rattled the industry. Like Uncle Nearest, the Oregon brand appeared to be doing well as far as sales were concerned.
“If you look at our Nielsen numbers last year, we actually grew,” Westward Founder and CEO Tom Mooney explained in an interview with T8ke.com. “More people went into stores to buy Westward than the year before. So you’d think we had a great year. But when you look at our distributors, our depletions into the trade, they didn’t grow, they were actually down double digits.”
Mooney claims that Westward lost half its sales last year, despite the fact customers were buying more Westward in stores.
“I didn’t see that coming,” Mooney expressed.
The craft spirits brand also faced other losses when Diageo stopped funding brands through its Distilled Ventures program. The incubator was an important source of funding for the brand, and though Mooney was not surprised the spirits giant pulled out, it definitely hurt the company’s chances from a financial standpoint. Mooney urged consumers who value craft whiskey brands like Westward and Uncle Nearest to support those brands as much as possible during dark times like these.
“This is an especially important time for anybody who appreciates the value of independent producers and what they bring to the industry,” Mooney expressed. “Everybody needs the support, right? So as much as I want you to choose a bottle of Westward at that home bar, support independence because many of us are in the same situation.”
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