Montana's republican U.S. Senate candidate used $10,000 in donations earmarked for past campaign debt to instead boost his 2016 campaign for state auditor, then dropped the penalties that the donors' company was facing after he took office, according to agency and campaign records.

Matt Rosendale loaned his 2016 state auditor campaign $10,000 the same month he received that amount in donations from the family members who run billings-based Friedel LLC to settle the campaign debt from his failed 2014 U.S. House run. It's an unusual but legal accounting move that Rosendale has also used in his campaign against democratic U.S. Senator Jon Tester. Rosendale spokesman Kyle Schmauch explained the action against Friedel.

“It followed standard legal procedure, same as every other case,” said Schmauch. “The negotiations for the settlement was all handled among legal counsel for the two parties. That would be the attorneys for our office, and the attorney for Mr. Friedel and his company.”

Schmauch said Rosendale had nothing to do with the settlement itself.

“Commissioner Rosendale himself did not handle any negotiations or settlement details, that’s standard operating procedure for administrative practices at our office,” he said. “The fine was dropped as part of the settlement agreement reached by the legal counsel, and it would have cost more money to pursue that fine through the court system than the amount of the fine itself. Another important thing to note is that Friedel’s company was out of the business at the time that the settlement was reached.”

Schmauch said he legally could not comment on anything other than the internal business conducted at the commissioner’s office and could not comment on Rosendale’s Senate campaign.

Rosendale declined to be interviewed on Tuesday. Spokesmen for his campaign and for the state auditor's office said there was nothing improper about how the Friedel family's donations or the Friedel LLC case before the auditor's office were handled. The settlement with Friedel LLC was first reported Tuesday by the Montana Free Press. Other facts in the story provided by the Associated Press.