The handling of a key contract by Gov. Kate Brown's campaign team raises questions about whether that contract benefits the governor's chief of staff.

In January, Brown's campaign staff decided to fire C&E Systems, the contractor that handled the reporting of donations and expenditures to the state Elections Division.

Brown's finance director, Tiernan Donahue, inked a deal with a new financial-reporting contractor in January, according to documents WW has reviewed.

But firing C&E Systems was a politically fraught move within Brown's inner circle. The company the campaign was poised to jettison has close financial ties to Brown's chief of staff, Kristen Leonard.

Leonard and her husband, Kevin Neely, owned C&E Systems until September 2014, when they sold the company to a political consultant named Jef Green.

In November 2015, Leonard became Brown's chief of staff—but Green hadn't finished paying her and Neely for C&E. He still owed them $35,000, according to Neely, and was due to make that payment by March 31, 2016.

C&E Systems also rents space in a Southeast Portland building owned by Leonard and Neely, and retained their employees.

Brown's campaign never followed through with its plans to fire C&E. It's not clear why the campaign backed off. A campaign spokesman declined to explain the decision.

What is clear is that C&E still has the campaign's business—and still owes Leonard and her husband money. (Green paid them $20,000 earlier this year but still owes $15,000.)

Brown's campaign has paid C&E $64,000 since Leonard joined the governor's staff.

Brown took office in February 2015 after her predecessor, Gov. John Kitzhaber, resigned in the midst of an influence-peddling scandal that involved first lady Cylvia Hayes' consulting contracts. Kitzhaber also permitted a tangled relationship between his campaign and state policy regarding fallout from Cover Oregon, the failed health insurance exchange.

Brown pledged to clean up Salem and restore transparency to state government.

But the circumstances around the contract with C&E raise questions about how carefully she is policing her top staff and whether her administration is observing the separation between her campaign and state staffs that elections law requires.

Todd Donovan, who teaches political science at Western Washington University, says there should be a clear separation between a governor's staff and campaign decisions. "There's a perception issue there," Donovan says. "Aren't there any other firms the campaign could have used?"

Leonard says she knew the campaign was considering replacing C&E but says she wasn't involved. "I told them, 'Make sure and talk to the governor and that she's OK with it,'" Leonard recalls.

Kristen Leonard (Courtesy Kristen Leonard)
Kristen Leonard (Courtesy Kristen Leonard)

But a former staffer says five months later Brown was displeased with the contractor.

Michael Kolenc, who was hired in May to manage Brown's campaign, says Brown told him this summer she thought C&E was charging too much in fees.

"The governor was very unhappy with the amount of money we were paying C&E, and she authorized me to negotiate a lower payment or make a change," Kolenc says. He says C&E did subsequently lower its charges.

Campaign spokesman Chris Pair declined to answer questions about Brown's involvement in the decision.

"Gov. Brown does not directly weigh in on day-to-day campaign decisions regarding routine vendor contracts and services," Pair said in a statement.

Kolenc was fired last month. Leonard says she was involved in that decision.

"He lacked the experience we needed," Leonard says.

Even that level of involvement concerns observers.

"It is problematic when you have a highly placed member of the governor's staff—who's involved in policy and whose salary is paid for by taxpayers' money—involved in the governor's political campaign," says Hana Callaghan, director of government ethics at the Markkula Center at Santa Clara University.

Leonard says she was only vaguely aware that Green owed her money and says she's never talked to him about business since taking her current job.

Records show, however, that Brown is C&E's largest customer. (Brown's relationship with Leonard and C&E goes back years. When Brown's 2008 campaign for secretary of state was low on cash, C&E loaned the campaign $10,000. The company never loaned money to any other candidate.) The possibility of losing Brown's business came at a difficult time. The company makes its money by doing bookkeeping for candidates and ballot measure campaigns, but is facing increased competition.

In the 2016 cycle, for instance, the campaign for ballot Measure 97—the $3 billion corporate tax increase that is expected to be the most expensive campaign in state history—hired a company called Bean Counter Services. In the past, C&E always handled Democratic ballot measures. Several legislative candidates have also moved their business to Bean Counter.

It remains unclear why Brown's campaign agreed to terms with a new company, then failed to follow through.

The owner of that company, Greene Compliance LLC, did not return calls seeking comment.

Pair, Brown's campaign spokesman, offered only a statement praising C&E's "well-known institutional knowledge and robust infrastructure."

Donovan says the whole situation should have been avoided.

"After what happened with the previous administration," Donovan says, "it's completely tone-deaf."