Vista - SmtpFailedRecipientException but email is sent and received

Our staging server has several web sites that send emails. Most of the
sites can send email but one of them is gettting the following message when
HTML formatted email is sent. We created a test page and verifyied that the
exact same code works on another website but not this one. The interesting
thing is that the email is in fact sent and recieved by the recipient even
though the .net component is returning this error.

It doesn't matter if I send an email to someone on our domain or someone
outside the domain. Both get that error and both recevied the email.

We are setting the login and password to our exchange server to send the
email.

We are running Windows 2003 in a VMware instance for the IIS.

Again, the EXACT same code works on a another website on the same system in
the same VMware instance of Windows 2003. We have rebooted the server, we
have isolated the application pool, thinking that perhaps the default app
pool was corrupted. (We have encountered application pool corruptions that
gives us weird results in the past so I was grasping at straws here.)

Server Error in '/TopWeb' Application.
--------------------------------------------------------------------------------

Mailbox unavailable. The server response was: 5.1.1 User unknown
Description: An unhandled exception occurred during the execution of the
current web request. Please review the stack trace for more information
about the error and where it originated in the code.

Exception Details: System.Net.Mail.SmtpFailedRecipientException: Mailbox
unavailable. The server response was: 5.1.1 User unknown

Source Error:

Line 74: //try
Line 75: //{
Line 76: formMail.SendHTMLData();
Line 77: LabelDisplay.CssClass = "t15";
Line 78: LabelDisplay.Text = "<p>An Email has been sent to your <span
class='t15purple'>" + domain + "</span> account with your TOP Connection
password, Please change your password once logged into the site, for
security purpose.</p><br><p>To change your password : Login to the site >
Edit My Profile > Change Password</p>";

Source File: d:\Intranet\TopWeb\Testing\HTMLEmailSample.aspx.cs Line: 76

Stack Trace:

[SmtpFailedRecipientException: Mailbox unavailable. The server response was:
5.1.1 User unknown]
System.Net.Mail.SmtpClient.Send(MailMessage message) +1877
Haggen.UtilitiesLibrary.FormMail.SendHTMLData() +2117
HTMLEmailSample.ButtonSendMail_Click(Object sender, EventArgs e) in
d:\Intranet\TopWeb\Testing\HTMLEmailSample.aspx.cs:76
System.Web.UI.WebControls.Button.OnClick(EventArgs e) +105
System.Web.UI.WebControls.Button.RaisePostBackEvent(String eventArgument)
+107
System.Web.UI.WebControls.Button.System.Web.UI.IPostBackEventHandler.RaisePostBackEvent(String
eventArgument) +7
System.Web.UI.Page.RaisePostBackEvent(IPostBackEventHandler
sourceControl, String eventArgument) +11
System.Web.UI.Page.RaisePostBackEvent(NameValueCollection postData) +33
System.Web.UI.Page.ProcessRequestMain(Boolean
includeStagesBeforeAsyncPoint, Boolean includeStagesAfterAsyncPoint) +1746