A letter from a watchdog of the state Treasurer's Office in 2002 asking Attorney General Patricia Madrid to investigate the office's use of an investment adviser was a key part of Thursday's testimony in the corruption trial of former Treasurer Robert Vigil.

The letter from Jan Goodwin, who at the time was director of the Board of Finance, also became part of a political battle outside U.S. District Court in Albuquerque. Republicans working to make sure Madrid doesn't unseat U.S. Rep. Heather Wilson, an Albuquerque Republican, jumped on Madrid for not acting after Goodwin wrote the letter.

But the situation is not that simple.

Madrid's office says it never got the letter. And it was unclear from Goodwin's testimony whether it was sent.

When contacted after the trial, Goodwin, now the secretary of the Taxation and Revenue Department, referred calls for comment to a department spokesman. He said Goodwin didn't want to elaborate on her testimony.

The political ramifications of Goodwin's letter probably didn't mortally wound Madrid's House campaign, said New Mexico political observer Joe Monahan.

But, he added, the letter is not good news for Madrid.

"This is bad timing and bad luck for the Democrats," Monahan said.

Goodwin was director of the Board of Finance from 2000 to 2002. The agency oversees the Treasurer's Office.

Prosecutors say former Treasurer Michael Montoya started a kickback scheme after he took office in 1995 and that it extended through Vigil's term, which began in 2003.

Montoya, who pleaded guilty to one count of extortion and is cooperating with federal prosecutors, has said he and others he worked with accepted as much as $5 million from investment advisers to whom the Treasurer's Office steered state business.

Vigil was deputy treasurer during the latter part of Montoya's term and in 2002 was elected treasurer. He has since resigned.

Vigil faces 28 counts of extortion, racketeering, money laundering and conspiracy, to which he has pleaded not guilty.

During 90 minutes of testimony Thursday, Goodwin said she had concerns about Treasure's Office operations during her time with the finance board. She never saw Montoya in the office during her tenure, she said.

For one $400 million deal, Goodwin said, she told Vigil that his office didn't have the required advice and consent of the board.

She also testified that in a letter to Madrid, she outlined concerns about the office's use of investment adviser Kent Nelson.

Although his contract had expired in November of 2000, Nelson continued doing work for the state. The letter asked Madrid to investigate the "apparent violation" of New Mexico's procurement code, Goodwin said.

The letter also told Madrid she might want to look into the ownership of some bank accounts, including one owned by Nelson, because there had been large transfers of money from Nelson's account, Goodwin said.

Nelson is a key cooperating witness in Vigil's case. He has pleaded guilty to one count of mail fraud involving $5,000 he paid to Montoya.

Nelson said he received more than $4 million in fees from investment work for the Treasurer's Office and "transferred" $2.9 million of that back to Albuquerque businessman Angelo Garcia, who prosecutors say funneled money back to Montoya and Vigil.

But Goodwin's testimony was unclear. The letter was prepared, she said, but she didn't know if it had been sent.

Her testimony prompted a flurry of activity in the Attorney General's Office on Thursday.

Office spokeswoman Sam Thompson said the office has no record of receiving the letter and that the assistant attorney general for the finance board wasn't aware of the concerns being raised at the time.

A statement put out by the office Thursday afternoon said, in part, "The letter was never received by the attorney general, if it was sent at all."

Back in the courtroom, one of Vigil's attorneys, Sam Bregman, worked to discredit Goodwin's concerns about the Treasurer's Office.

"You have no personal knowledge that Robert Vigil ever shook anybody down, do you?"

"No, I don't," Goodwin said.

Goodwin lost to Vigil in the 2002 Democratic primary for state treasurer.

Republicans quickly responded to Goodwin's testimony on the letter. State party Executive Director Marta Kramer said Madrid "doesn't have the will to investigate her friends and colleagues." Like Madrid, Vigil and Montoya are Democrats.

"That's sad for New Mexico, because it's hard for letters like that to get lost," Kramer said. "They could have even walked it over (to Madrid's office)."

"Clearly this is going to hurt her credibility as a candidate," Kramer said.

Heather Brewer, Madrid's campaign spokeswoman, said that's not the case.

"This absolutely does nothing of the kind," she said. "If the Republicans are so concerned about candidate credibility, they should look at the $48,000 Heather Wilson took from Tom DeLay," who stepped down as U.S. Speaker of the House under a cloud of corruption accusations.

Vigil's attorneys have worked to clear his name and got testimony this week from Nelson that Vigil never asked him for money.

Vigil, however, was seen on one videotape shown to the jury accepting $11,500 from Nelson in a recording for the FBI.

While defense attorneys say money was a campaign contribution, the prosecution contended it was in exchange for state business. Nelson testified the money was not a campaign contribution.

Earlier Thursday, FBI Special Agent Andrew Matas, one of two agents who rode with Vigil from Ribera to Albuquerque on the September 2005 day he was arrested, said he asked Vigil whether he had ever received $11,500 from anybody. Matas said Vigil replied that he had not.

Vigil resigned as lawmakers were considering whether to impeach him. Doug Brown is running the office until voters later this year chose a new treasurer. The candidates are Democrat James Lewis and Republican Demesia Padilla, both of Albuquerque.

The trial in federal court could last two to three more weeks. About 80 potential witnesses are on lists made by the prosecution and defense.