When asked how she felt after finding out a man she had known for 20 years was accused of embezzling millions of dollars, Killeen resident Kakie Shea’s answer was not surprising,

“I was shocked,” Shea said. “Absolutely shocked.”

Hubert N. Kott, 66, is facing felony charges in the theft of an estimated $2.2 million from 195 Lumber in Killeen, where he worked as the company’s chief financial officer.

Kott was arrested in March, but it wasn’t the first time he was accused of questionable business practices. In fact, Kott and a company registered in his name are subjects of an ongoing civil lawsuit filed by Shea shortly before his arrest in February.

According to court documents filed by Shea and her attorney, Shea worked with Kott in the early 2000s to “flip” properties. Kott purchased properties that Shea would fix up then sell for a profit.

“He seemed to be a much better manager of money,” Shea said in a written affidavit. “While I seemed to be a better manager of properties.”

The two formed S&K Investments in 2003. According to a contract, Shea and Kott each owned 50 percent of the company. The company bought properties for investment, including renting the homes. Shea said Kott handled the financial aspects of the business, and she managed the properties.

Falling out

The partnership worked well until 2009, when the two had a falling out after Kott said he wanted to liquidate all the properties immediately and retire.

Shea said he later began collecting rent from tenants on those properties, asking them to make the payments to “H.N. Kott.”

The relationships disintegrated further. In 2011, Shea said Kott began putting the properties on the market.

“I disagreed with the low, or sometimes no-bottom, asking price he would provide to those listing properties,” Shea said.

After she retained an attorney in 2012, Shea received a letter from an attorney representing another company, Kott’s KC&B Investments. The letters stated she owed money to KC&B on the loans to five Killeen properties totaling more nearly $100,000, according to documents submitted for the suit.

Shea charges that Kott, through KC&B, purchased the loans on those properties from Extraco Bank. He then began moving forward to foreclose and sell the properties.

“I think that Mr. Kott is out to destroy me, and take everting that I have,” Shea stated in the affidavit. “I feel he has violated every level of trust and breached every level of duty that he owed me as a partner.”

A counter claim filed by Kott’s attorney charges that Shea was collecting rent on the properties, and keeping them for herself instead of splitting them with Kott, or using them to pay the debt on the loans.

“(Kott) is not liable to (Shea) because of fraud in that (Shea) received partnership income with intent to deprive her partner, Kott, of his right to share in the income,” the response stated.

Civil case on hold

The suit is still making its way through the Bell County Court system. However, it may be some time before there is any resolution.

Kott was granted a reduced bail amount by Bell County District Judge Fancy Jezek in his criminal case in April. While out on bail, Kott is barred from selling or acquiring property or disposing of any assets or properties, which would likely include those involved in the dispute with Shea.

“The case is stopped right now, for all practical purposes,” said Jay Beatty, the attorney representing Kott in the civil suit.

Shea and her lawyer would not comment on whether they thought the money Kott allegedly embezzled from 195 Lumber was tied up in the properties involved in their dispute.Court documents indicate Shea’s attorney subpoenaed 195 Lumber for invoices, and records of payments made by Kott, Shea and S&K Investments. The subpoena was issued Jan. 27, a few months before the criminal allegations against Kott became public.

Beatty, who is not representing Kott in his criminal case, said no one had spoken with him about any connection between Kott’s criminal case and the lawsuit. Beatty said his client still stood by his counter claims against Shea.

“We are sticking with the pleading in the file,” Beatty said.

While the criminal charges against Kott may slow the progress on her lawsuit, Shea said she was somewhat relieved when she heard that Kott was indicted and facing criminal charges.

“Personally, it made me feel better that the truth is starting to come out,” Shea said.

Contact Chris McGuinness at chrism@kdhnews.com or (254) 501-7568. Follow him on Twitter at ChrismKDH.

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