David Petersen's office searched by investigators.

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PHOENIX — State Treasurer David Petersen is being investigated on suspicion of stealing from the public, that he was engaged in a fraudulent scheme and violated conflict of interest laws.

Documents obtained Thursday from the state Attorney General's Office show that Tina McMillion, a special agent for the agency, searched Petersen's office after obtaining statements last week from top aides to the treasurer that Petersen used his position and state funds to promote a character education program — a program to which he had financial ties.

McMillion said Tony Malaj, Petersen's chief of staff, also provided evidence that Petersen had a $1,500 check for a speaking engagement he made as state treasurer reissued to him personally despite legal advice that it would violate the law.

The documents also show that Malaj said Petersen routinely traveled around the state at taxpayer expense, making presentations on character education.

And they include a letter Petersen sent on official state stationery to state School Superintendent Tom Horne, trying to convince him to allow the Character First program to be used in Arizona schools. Horne told Capitol Media Services that Petersen was upset because the state was working with a competing program.

McMillion said Malaj reported that Petersen had acknowledged to him that he had been paid by the Character Training Institute, which runs Character First.

Malaj also said Petersen took him to a meeting in September with convicted junk bond dealer Michael Milken to get him involved in the Character First program that Petersen was promoting.

Ideas about the program from Milken, who pleaded guilty in 1990 to violating federal securities and racketeering laws, were e-mailed into the state computer system operated by the Treasurer's Office. And Petersen later traveled to Los Angeles at state expense to meet with Milken.

Blaine Vance, the chief deputy treasurer, provided similar reports.

But Vance also said Petersen hired Raquel Wood, his future daughter-in-law. And he hired Rhonda Bryce, who was managing Petersen's re-election campaign, though Vance said he has yet to see any work from her.

Vance also said one of the stock traders in the Treasurer's Office told him that within minutes of executing a trade with Citibank, he overhead Bryce call Citibank and ask for money for the Character First program.

Petersen did not return phone calls. He announced Wednesday he would not seek re-election when his four-year term ends in December.

Armed with a search warrant, state investigators raided Petersen's office last week and took several computers and back-up tapes. They also confiscated business records regarding the Milken Institute — a think tank chaired by the former Wall Street financier — as well as Character First materials and a Bank of America credit card in Petersen's name but with a woman's picture.

The incidents date back to 2003, after Petersen was first elected, when a speakers bureau approached him to have him appear as state treasurer to give a keynote speech and be paid a $1,500 honorarium.

Malaj obtained a written opinion saying Petersen could not keep the money, an opinion he shared with the treasurer. Despite that, Petersen had the original check, which was made out a to school, reissued to him.

McMillion also said Malaj told her Peterson has required state employees to attend weekly character education programs in the office, with the state paying for materials from the Character First program.

Petersen has been involved with Character First since his days as a state senator.