Farm Credit rejects claim it ignored warning signs

Lender argues Uncle Nearest waived the claim and cannot shift responsibility for alleged internal fraud

6:45 p.m. July 17, 2026

DUANE CROSS
MCO Publisher•Editor

Farm Credit Mid-America has asked a federal judge to dismiss a counterclaim accusing the lender of overlooking warning signs as Uncle Nearest’s revolving credit line grew from $35 million to nearly $67 million.

The motion, filed Friday, July 17, in U.S. District Court for the Eastern District of Tennessee, argues that Uncle Nearest waived the claim and cannot hold Farm Credit responsible for alleged fraud committed within the company.

Farm Credit asked Judge Charles E. Atchley Jr. to dismiss the counterclaim with prejudice, preventing it from being refiled. The court has not ruled on the request.

Court-appointed receiver Phillip G. Young Jr. filed the counterclaim July 7 on behalf of Uncle Nearest Inc., Nearest Green Distillery Inc. and Uncle Nearest Real Estate Holdings LLC.

Young alleges Farm Credit failed to exercise reasonable care while administering the companies’ credit facilities. The counterclaim accuses the lender of failing to verify financial reports, confirm large withdrawals with other company officers, conduct meaningful collateral inspections and maintain adequate fraud controls.

Farm Credit rejected those allegations, arguing the receiver is attempting to shift responsibility for alleged fraud and poor financial oversight inside Uncle Nearest.

“In short, it was Uncle Nearest’s oversight of its own accounting, not Farm Credit’s oversight of Uncle Nearest, that was consistently lacking,” the lender’s attorneys wrote.

Counterclaim cites missed warning signs

The dispute centers largely on former Uncle Nearest Chief Financial Officer Michael Senzaki.

According to the receiver’s counterclaim, Senzaki controlled much of the company’s financial reporting, loan compliance and communication with Farm Credit. He allegedly submitted inaccurate financial information, inflated inventory figures and concealed the company’s true expenses and outstanding bills.

According to the filings, Farm Credit increased Uncle Nearest’s revolving credit line from $35 million to $66.98 million by August 2023. Senzaki submitted 28 draw requests between July 2022 and August 2023 totaling nearly $67 million.

The receiver has alleged that Senzaki falsified monthly financial reports, forged signatures, fabricated board minutes and redirected company money for his own benefit.

Young argues Farm Credit should have recognized several warning signs, including Senzaki serving as the sole signer of draw requests and sole author of supporting financial reports. The counterclaim also cites the size of the monthly withdrawals and alleges fees gave Farm Credit an incentive to continue processing them.

It seeks damages tied to the credit-line increase, nearly $400,000 in fees and costs connected to loan amendments and losses caused by Senzaki’s alleged misconduct.

Farm Credit said it relied on documents submitted by an authorized company officer and received multiple forms of verification supporting the transactions.

“Simply put, Farm Credit had multiple verifications from multiple parties, and there is no well-pled allegation of breach,” its attorneys wrote.

Farm Credit says claim was waived

Farm Credit’s first argument for dismissal rests on an April 15, 2025, amendment to the credit agreement.

The amendment included a forbearance agreement and a broad release covering claims related to the loans that arose on or before its effective date.

The provision released Farm Credit and related parties from “all possible claims, demands, actions, causes of action, damages, costs, expenses and liabilities whatsoever,” whether known or unknown.

Farm Credit argues every event cited in the counterclaim occurred before the release took effect.

The disputed withdrawals occurred between July 2022 and August 2023. Farm Credit inspected the company’s collateral in October 2024, and Senzaki left the company before the end of that year.

Because Young acts on behalf of the Uncle Nearest companies that signed the agreement, Farm Credit argues the receiver is bound by the same release.

Lender disputes duty to investigate

Farm Credit also argues New York law governs the dispute because the credit agreement contains a New York choice-of-law provision.

Under New York’s economic-loss doctrine, the lender argues Uncle Nearest cannot turn a contract dispute involving financial losses into a negligence claim.

Farm Credit also contends lenders generally do not owe borrowers a special duty of care under either New York or Tennessee law.

The credit agreement describes the loans as arm’s-length commercial transactions and states that Farm Credit was not serving as an adviser, agent or fiduciary for Uncle Nearest. Another provision states that Farm Credit was not required to independently verify company statements, certificates, or financial reports.

Farm Credit said the responsibility for preparing and certifying that information rested with Uncle Nearest and its officers.

The lender also noted that Fawn Weaver signed amendments reflecting increases in the credit line, arguing those signatures contradict any claim that company leadership was unaware of the growing loan balance.

Farm Credit’s final argument relies on the legal doctrine of in pari delicto, which can prevent a party from recovering damages caused by its own intentional wrongdoing.

The lender argues Senzaki was acting as Uncle Nearest’s chief financial officer when the alleged fraud occurred and that his conduct can legally be attributed to the company.

“Because Senzaki’s intentional misconduct substantially exceeds any passive oversight Farm Credit is alleged to have exhibited,” the attorneys wrote, “the Counterclaim is barred.”

The motion now leaves Atchley to decide whether the receiver may pursue claims that Farm Credit says Uncle Nearest released nearly 15 months before filing the counterclaim.