He wasn't present 'physically' but used Kidman as a conduit due to having her chip inside her.
That's because Sebastian is destroying the very same brains keeping the place in order, one by one! At first, even with all the Lost running around, things seem relatively normal.but then Sebastian comes in, killing them by the hundreds, and things start going awry. At first, it might seem that each of the people in control make it worse (as they twist it around to reflect their personality, indicated by the color and general feel), but then we learn that STEM actually needs many people connected to it, whose brains will act as processors, to keep it stable. Entire blocks cut out and floating around houses, streets and buildings crumbling even the sky progressively more messed up.
Like any other human being, he buried those emotions away in order to not face the reality which was where the first Evil Within came. His daughter was killed in a fire and his wife left him.