By Adam Kirby

JOLIET, Illinois (Reuters) - The sister of former Chicago-area police officer Drew Peterson's wife, whose body was discovered in a bathtub in 2004, initially suspected that Peterson was involved in her death, according to testimony on Friday in Peterson's high-profile murder case.

Peterson is accused of killing Kathleen Savio, his third wife, while they were engaged in a contentious divorce in 2004 and staging her death to look like an accidental drowning.

Peterson once told Savio that "he could kill her and make it look like an accident," Savio's sister, Susan Doman, testified that Savio told her. "She was terrified."

Days after Savio's body was found, Doman confronted Peterson by asking, "Did you kill my sister?" Peterson replied that he would not kill the mother of his children, according to Doman's testimony.

Later that same day, Doman witnessed Peterson entering the bathroom where Savio died. Doman asked Peterson what he was doing, and he told her he was wiping up blood, she testified.

Peterson's defense team countered Doman's testimony by charging that she has a financial interest in seeing Peterson convicted. The defense entered as evidence a contract Doman signed for a book and film deal that would pay her $30,000, plus royalties, in the event that Peterson is found guilty and a book about the case were published.

In other testimony on Friday, Steve Maniaci, who began dating Savio around the same time as her separation from Peterson in 2002, recalled talking with his girlfriend's ex-husband outside Savio's home on the night of her death.

"I said, 'Drew, I sure hope you didn't have anything to do with this;' he said, 'I did not,'" Maniaci testified. "Then I said, 'This sure worked out well for you,' and he said, 'She would have lost anyway in the divorce.'"

Maniaci testified that Peterson was calm shortly after Savio was found dead.

Investigators initially ruled Savio's death accidental. Suspicions were raised, however, when Peterson's fourth wife, Stacy Peterson, disappeared in 2007. Savio's body was exhumed and re-examined and Peterson was charged with murder.

Through eight days of testimony, prosecution witnesses have portrayed Savio as having lived in constant fear of Peterson. With little physical evidence to link Peterson to Savio's death, prosecutors have sought to introduce testimony that he threatened her and tried to hire a hitman.

Defense attorneys have objected to the testimony as hearsay and twice sought mistrials. Judge Edward Burmila has denied a mistrial, but has limited the testimony prosecutors may present.

The trial is scheduled to resume on Tuesday in Will County. So far only 14 of the more than 70 potential witnesses have taken the stand.

The Peterson case has drawn national attention and was the subject of a popular Lifetime television network movie, "Untouchable," starring Rob Lowe. Peterson is the sole suspect in the disappearance of Stacy Peterson, who has never been found. His first and second wives have remarried.

(Editing by Mary Slosson and Xavier Briand)