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Larry Magstadt, owner of Northland Boring LLC in Streele, stands in the company equipment yard in March. He is hoping his business will survive after an employee made unauthorized payments to herself from his business account.

STEELE — A Burleigh County drilling company that had 13 employees at the height of the Bakken oil boom is now struggling to survive a year after the owner discovered a secretary made unauthorized payments to herself.

Larry Magstadt, the owner of Northland Boring LLC, said he lost nearly $700,000 to employee Melinda Strom, who wrote checks and made electronic transfers to herself and her business without permission.

Strom, 51, who pleaded guilty Friday in Burleigh County District Court to misapplication of entrusted property, a Class A felony, admitted only that the amount exceeded $50,000.

A restitution hearing is set for April 9 to determine how much money Strom will be ordered to pay Magstadt in restitution.

It’s been about a year since a tax preparer discovered some discrepancies in Northland Boring’s books. Magstadt and his wife, Shelly, said they feel betrayed by Strom, a former high school classmate.

“He trusted her,” Shelly Magstadt said. “He never went into the bank account because he trusted her.”

Court records show about $200,000 in unauthorized checks from December 2014 to March 2017 written to Strom and her business, Beary Tweet & Tasty.

During the hearing Friday, Assistant Burleigh County State’s Attorney Marina Spahr said prosecutors believe there were many more unauthorized payments that bring the full amount close to $700,000.

“She hid it well,” Shelly Magstadt said after the hearing.

Larry Magstadt said he is about ready to lose his business, which also has been affected by a slowdown in the oil industry. Northland Boring is a contractor that does horizontal directional drilling, such as boring under road crossings for pipeline projects.

The business had an office in Bismarck, but he’s consolidated the operation to Steele and sold some equipment. Magstadt said he recently bought out his last partner and the company now employs only Magstadt and his brother.

“It’s going to be a struggle,” Larry Magstadt said.

Defense attorney Bobbi Weiler said during the hearing that Strom had a drug addiction that factored into her “bad thinking at that time.” Weiler said Strom has been clean for more than a year now.

After the hearing, Weiler and her client did not have any comment.

South Central Judicial District Judge James Hill ordered Strom to serve three years of probation, with restitution to be ordered at the April hearing. Hill rejected a recommendation from prosecutors to give Strom a deferred imposition of sentence, meaning she would have a clean record if she completed the terms of the sentence.

Hill said he could not justify a deferred imposition of sentence considering Strom’s conduct extended over three years.

"It's a succession of criminal acts," Hill said.

(Reach Amy Dalrymple at 701-250-8267 or Amy.Dalrymple@bismarcktribune.com)

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