In May 2004, JER Partners, a McLean-based real estate firm headed by local philanthropist Joseph E. Robert Jr., was pursuing an $85 million investment from an Illinois pension fund when a fax arrived from the Turks and Caicos Islands.

The document requested an $850,000 finder's fee for a consulting firm that had not done any work for JER.

The next day, a Chicago attorney was on the phone warning that unless JER signed the agreement, it would lose the pension fund deal, according to court papers on file in Illinois.

The Chicago attorney, who had been a top fundraiser for the Democratic Party, said, according to court papers, "that this was how things are done in Illinois."

JER didn't sign -- and was still awarded the $85 million pension fund investment. But the episode nevertheless has the potential to make JER a key player in the prosecution of an alleged extortion scheme that is casting light on the role of politically connected intermediaries who help private money management firms court investments from public pension funds.

The Justice Department says it is investigating business practices at Illinois state boards, and it recently obtained indictments against two people in connection with the alleged attempt to extort money from JER. The Chicago lawyer who is alleged to have made the calls, Joseph Cari, has agreed to plead guilty and is cooperating with the government, according to his lawyer, Scott R. Lassar.

Cari served as one of the Democratic National Committee's finance chairmen during the 2000 elections and previously was finance chairman of the Democratic Senatorial Campaign Committee.

Stuart Levine, who was a member of the pension fund board at the time of the alleged shakedown and is accused of attempting to extort kickbacks from multiple firms, has pleaded not guilty, said his attorney, Marc W. Martin.

Martin declined to comment further.

JER spokesman Franz Paasche said the company "refused to participate in an improper course of conduct" and has been cooperating with an investigation by the U.S. Attorney for the Northern District of Illinois. Paasche added that the McLean firm "is not under investigation."

The JER spokesman would not say whether the firm alerted law enforcement to the alleged extortion attempt, and spokesmen for the FBI and the U.S. attorney in Chicago also declined to say.

Robert, a former amateur boxer, is a prominent member of the Washington business community. With his friend James V. Kimsey, co-founder and former chairman of America Online Inc., Robert traveled into the mountains of Colombia several years ago to try to persuade Marxist rebels to drop their guerrilla war and stop trafficking in drugs. When a stranger got aggressive with his wife at an Adams-Morgan nightclub in 2000, Robert interceded, blocking a punch and landing one of his own, as recounted in The Post's Reliable Source column.

In a statement provided by his office, Kimsey said he had no firsthand knowledge of the pension fund episode but said, "I have known Joe Robert for years, and I know he would never ever cave to this kind of pressure regardless of how much money was involved."

Robert founded Fight Night, an annual D.C. boxing gala that raises money for children's charities, and he is part of a group of investors seeking ownership of the Washington Nationals baseball franchise. His business was built largely on managing assets of failed savings and loans.

Early last year, JER was trying to do business with the Teachers' Retirement System of Illinois, which manages pension money for teachers in the state's public schools. The indictment outlining the alleged extortion attempt does not identify JER by name. Instead, it refers to "Investment Firm 4," described as a Virginia real estate investment and asset management firm that sought and received an $85 million investment from the teachers' pension fund.

Several sources with knowledge of the indictment said the Virginia firm was JER, as reported recently by the Chicago Tribune. Minutes of a pension fund board meeting say that, in May 2004, the board approved an $85 million investment in JER Real Estate Partners III LP.

According to the indictment, after the Virginia firm had made a pitch to members of the pension fund staff, then-board member Levine told representatives of the firm that he would like to help but could not talk with them directly because of restrictions on contact between members of the board and parties with business before it. Levine instead "used Cari to communicate" with the investment firm, the indictment alleges.

When the real estate firm did not sign the proposed consulting agreement that arrived by fax from an unnamed source in the Caribbean, Cari made a series of phone calls, the indictment alleges.

"Cari said that if Investment Firm 4 wanted to get money from [the teachers' pension fund], the company had to hire a consultant," the indictment said. "Cari said that if Investment Firm 4 did not enter into the consulting agreement by the end of the day, the company was going to lose the . . . commitment." In another conversation, Cari allegedly told lawyers for JER that if it didn't sign, the firm would be taken off the pension fund's May agenda, the indictment alleges.

When the real estate investment firm did not sign the consulting agreement, Levine directed a member of the pension fund staff to pull the firm off the agenda for the fund's May 2004 board meeting, the indictment alleges. The staff member refused, and on May 25, 2004, the board approved the $85 million investment.

Levine joined his fellow trustees in voting to approve it, according to board records.

An Illinois pension fund board member allegedly tried to gouge Joseph E. Robert Jr.'s company.

Stuart Levine, a former member of the Illinois pension fund board, is accused of attempting to extort kickbacks from multiple firms.