Published June 28, 2010

For the last three years, Mayor Daley’s nephew Robert G. Vanecko has been a frequent figure in the news.

First, when the Chicago Sun-Times revealed that five city pension funds gave him $68 million to investment in risky real estate deals.

Later, when a federal grand jury began investigating.

Now, Vanecko’s real estate deals are falling apart, records show, potentially jeopardizing the money he got from the pension funds representing Chicago’s police officers, teachers, city employees and CTA workers.

And it turns out that other Daley family members were involved in one of those soured deals — a plan to build condos next door to the mayor’s favorite South Loop restaurant, the Chicago Firehouse.

The restaurant, opened 10 years ago in a former city fire station, is next door to the longtime home of the National Association of Letter Carriers’ Chicago branch.

Three years ago, union leaders decided to sell their two-story building, hoping to turn a profit so they could build a new headquarters elsewhere in the city.

Several developers were interested. The best offer came from Vanecko and his business partner, mayoral ally Allison S. Davis. They wanted to put up a 32-story building — either condos or hotel rooms — on the property at 1411 S. Michigan Ave. and agreed to pay $8.5 million for the land once the union built its new headquarters at 3850 S. Wabash.

They gave the union a down payment — and advanced millions of dollars in city pension funds so the union could buy land and build its new home.

To date, Vanecko and Davis have given the union more than $4.5 million in city pension funds — including an $850,000 down payment, a “predevelopment commitment’’ advance of $400,000 and a $2.9 million line of credit, records show.

Last summer, Vanecko walked away from the company that he and Davis created, DV Urban Realty Partners, soon after a federal jury issued subpoenas to the company and the pension funds. Then, Davis and his son Jared Davis told the union they no longer wanted to buy the property — and they wanted the pension fund money back.

The union said no and filed a breach-of-contract suit last September in Cook County Circuit Court against DV 1411 South Michigan Avenue LLC, the company Vanecko and Davis had set up to develop the property. DV 1411 filed a countersuit in March.

“They’re trying to back out of the deal,’’ said Mack Julion Sr., president of the National Association of Letter Carriers. “They say they couldn’t get the zoning they needed, but they had ample time to do that. . . . They’re pretty much leaving us holding the bag.’’

Neither Davis nor Vanecko responded to interview requests.

Vanecko has been a source of public embarrassment for his uncle, the mayor, who said last summer that he’d been unaware of Vanecko’s deal with the city pension funds until he read about it in the Sun-Times.

“When I did find out, I made it very clear that it was not a good decision and that

he should end the business relationship immediately,’’ Daley said then. “But, as an adult, Bob made . . . a different decision, which led to a very painful string of news stories that have, indeed, caused tension in my family.

‘‘I love my nephew. It’s difficult for me to have my disappointment in him made public.”

While the economy has hurt the real estate investments made by Vanecko and Davis, it hasn’t kept them from collecting more than $4 million in fees from the city pension funds since 2007.

Davis, 70, and Vanecko, 44, set up their real estate investment company in November 2004. They asked a host of government pension funds and businesses, including Commonwealth Edison, to invest in DV Urban but were only able to persuade five city pension funds to invest a combined $68 million, which they said they would use to redevelop neglected neighborhoods in Chicago.

Their first deal closed in September 2006 — a 344-unit apartment building at 1212 S. Michigan with a $56 million mortgage and about $9 million in pension money.

Over the next year, Vanecko and Davis bought another apartment building in South Shore and invested in two office buildings, including the former Chicago Defender headquarters that’s now owned by Matthew O’Malley, who also owns the Chicago Firehouse restaurant.

Then, they struck the deal to buy the letter carriers building next door to the restaurant on Aug. 29, 2007, a month before the Sun-Times exposed Vanecko’s deals with the city pension funds.

“It was the best bid, in terms of dollars,’’ says Elvin Charity, the union’s attorney.

“We were real clear that we were looking for the highest bids and whatever support we could get from the developers to finance a new headquarters.”

To negotiate the deal, Davis and Vanecko hired the law firm of Daley & George, founded by the late Mayor Richard J. Daley and now headed by Michael Daley, the current mayor’s younger brother. Michael Daley’s son-in-law, Allan “Kelly’’ Ryan IV, worked the deal with Dennis Aukstik, ex-brother-in-law of William Daley, another of the mayor’s brothers.

The deal gave the letter carriers union three years to relocate to a new headquarters, a move it made last fall.

Davis and Vanecko agreed to obtain City Hall’s approval for their project, including “all necessary zoning,’’ within one year. But they never formally sought city permission to develop the property because Ald. Robert Fioretti (2nd) didn’t support the project, according to court records filed by Davis’ attorney Edward T. Joyce, a relative of the mayor’s longtime political adviser, Jeremiah Joyce.

“The alderman’s unresponsiveness was a clear indication to DV that its [planned development] application would not be approved,’’ Davis says in court documents, explaining why they never filed those applications with City Hall.

Where the two sides disagree is whether Davis and Vanecko failed to act in time.

The union says Davis and Vanecko missed their one-year deadline but still have to come up with the remaining money to buy the property.

Davis argues that, since they couldn’t get zoning approval, the deal should be off and they should get their money back.

Davis’ son Jared says they would still be interested in buying the property — if the union would lower the the $8.5 million price.