By Mark Wineka

Salisbury Post

A civil lawsuit filed on behalf of Noble and Kelsey Funeral Home alleges that its former president and a removed trustee committed fraud and combined over a five-year period to drain the business of hundreds of thousands of dollars in assets.

Noble and Kelsey, located at 223 E. Fisher St., also charges in the lawsuit that former president and general manager Tommy H. Hairston was purposely damaging the business while pursuing the goal of opening his own funeral home on South Main Street.

The former trustee named in the suit is Kathy S. Hill, who allegedly received at least $179,750 in loans and $167,200 for "consulting" between 2003 and 2007. The total cash she received, including $10,000 Hill paid to herself in June 2007, was $346,950, according to the suit.

The Post reached both Hairston and Hill by telephone Monday, but they declined to comment.

Salisbury Police Chief Mark Wilhelm said last week that his department investigated the matters for possible criminal action but received an opinion from the state Attorney General's office that it should be civil litigation.

The civil suit further alleges that Hairston rang up personal charges on Noble and Kelsey's American Express credit card between June 2004 and June 2007 of $35,644.

The credit charges included Direct TV monthly service, numerous hotel stays, airline tickets, clothing, car work and other merchandise.

The suit says Hairston's annual wages and bonuses also increased substantially each fiscal year since 2002, when he was paid $81,472. His wages in subsequent years were $95,935 in 2003; $106,357 in 2004; $189,229 in 2005; $210,121 in 2006; and $132,885 for the months before he resigned in June 2007 and opened up his new funeral home.

The suit alleges that "Hairston applied the extensive salary and bonus proceeds ... to the establishment of Hairston Funeral Home Inc." It adds that Hairston, through "Zeke Properties, purchased the real estate that became his new funeral home while he was employed by Noble and Kelsey."

According to the suit, Hairston also actively worked to take clients away from Noble and Kelsey Funeral Home and, soon after his resignation, solicited pre-need contracts from his former employer.

In addition, the suit alleges that at some point in 2006, Hairston placed Hill and/or her son on the company's health insurance plan, even though Hill was not eligible to be on the funeral home's plan.

Clerk of Court Jeff Barger removed Hill as a trustee on Dec. 19, 2007.

Attorney Jon S. Overbey, of Hancock Nance Overbey, is representing Noble & Kelsey in the case.

Besides Hairston and Hill individually, Hairston Funeral Home and T.H. Hairston Inc., doing business as Zeke Properties, are listed as defendants.

Hill and Hairston live at separate Candlewick Drive addresses.

Central to the whole civil litigation is a trust set up by the will of the late A.R. Kelsey.

The trust holds 99 of 100 outstanding shares of stock of Noble and Kelsey Funeral Home. By its terms, the suit says, the trust was established to provide employment for Hairston, subject to his satisfactory performance, and ultimately the stock ownership would go to Kelsey's daughter, Kimberly D. Kelsey.

After the death of Kelsey, Winnell Short and Dr. George D. Hill became trustees of the trust. Short later resigned, making Hill the sole trustee. He died in 2002.

Kathy S. Hill, his widow, filed an application with the Rowan County Clerk of Court and sought to be named the successor trustee. She received the appointment.

The lawsuit says Hill had no special skill, ability or professional license qualifying her to supervise a funeral home's operations, nor any experience in hiring or supervising licensed professional personnel of a funeral home.

"The primary duty of the trustee ... was to employ and supervise Tommy Hairston as president of Noble and Kelsey Funeral Home Inc,"' the lawsuit says.

Hairston began signing checks made out to Hill for loans or "consulting" beginning Feb. 24, 2003, the suit says. Likewise, wages and bonuses paid to Hairston began to escalate, it contends.

During 2006, the suit alleges, Hill became aware that Hairston was making plans to establish his own funeral home.

"Kathy Hill knew or should reasonably have known that Mr. Hairston's actions to establish his own funeral home would be likely to have an adverse effect on the business operations of Noble and Kelsey Funeral Home Inc.

"Kathy Hill took no steps to remove Mr. Hairston or otherwise take any actions to establish a plan of management succession for the funeral home despite her knowledge of Mr. Hairston's stated intentions to establish his own competing business."

The suit also charges that Hairston should have known Hill was not entitled to any payments for consulting, loans or bonuses and that he was "grossly negligent" in disbursing the funeral home's assets without documentation, terms of repayment or setting any kind of interest rate.

The suit says that Hairston's and Hill's actions were "willful and wanton and designed to place the funeral home in a precarious financial condition at the time when Hairston opened his competing business."

In addition, the suit alleges, Hill never obtained a tax identification number for the trust nor filed trust tax returns with the Internal Revenue Service. It also says she failed to obtain a fidelity bond to protect the trust, was consistently late in making annual reports to the clerk of court and failed to call meetings of the directors of Noble and Kelsey Funeral Home.

In the fall of 2004, Kimberly Kelsey, who continually made inquiries into the profitability of Noble and Kelsey Funeral Home, petitioned the court to have an additional trustee appointed to serve with Hill.

She asked the court to appoint Dennis Issacson, a certified public accountant, who was opposed by both Hill and Hairston.

A first hearing was held before Barger, the clerk of court, in April 2005. It ended with Barger's asking Hairston and Hill to provide other trustee nominations and taking the matter under advisement. A ruling on Kelsey's petition was not made until June 27, 2007, when Barger appointed Issacson as co-trustee and directed him to review the trust's operations.

Based on Issacson's research, Barger found that Hill failed to carry out her duties as a trustee and followed conduct "to improperly enrich herself at the expense of the trust, the beneficiaries of the trust and the corporation of which the trust held 99 percent ownership."

Barger permanently suspended Hill as a trustee Dec. 19, 2007.

T.H. Hairston Inc., was formed Dec. 23, 2004, according to articles of incorporation filed with the N.C. Secretary of State. A 2005 annual business corporation report for T.H. Hairston Inc. was signed by Tommy H. Hairston as president and stated that the Hairston Inc. was "a funeral home business."

Hairston was president and general manager of Noble and Kelsey Funeral Inc. at the time he formed T.H. Hairston Inc, the suit says.

In June 2007, when Hairston left, Noble and Kelsey had less than $26,000 in its general operating account, the suit says.

Contact Mark Wineka at 704-797-4263 or mwineka@salisburypost.com.

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