Two powerhouses in Chicago’s Indian-American community told the team of then-Illinois Gov. Rod Blagojevich (D) that Rep. Jesse Jackson Jr. (D-Ill.) would raise $5 million for the governor in return for the Senate seat being vacated by Barack Obama, the Chicago Sun-Times reported today.

The first [approach] came from Rajinder Bedi, a state employee who acted as a conduit to the Indian community for Blagojevich, sources say. Bedi met with the governor’s brother, Robert, to tell him that a longtime fund-raiser and wealthy health care businessman, Raghuveer Nayak, would help organize fund-raising within the Indian community and that Jackson would raise money as well.

Then, at an Oct. 31 planning luncheon at the India House restaurant in Schaumburg, Nayak delivered a similar message to Robert Blagojevich, the Sun-Times has learned. Nayak allegedly identified himself to the Blagojevich camp as a representative of Jackson, sources say.

At some point, signals were crossed in communicating the dollar amounts, though, leaving Rod Blagojevich to believe, according to the criminal complaint against him, that he would be paid $1.5 million should he appoint Jackson to fill Obama’s seat.

But the offer was really supposed to be $5 million raised by Jackson, as well as up to $1 million from the Indian community, sources said.

Jackson has denied any wrongdoing and vows to cooperate with any investigations (including that launched by a congressional panel earlier this month). Still, you can be sure he’s wishing that this news hadn’t broken in what is likely to be a fairly slow news week, with Congress on recess and the Somali pirate saga now ended.

The report, released late Tuesday, does provide some new information. Rahm Emanuel, Obama’s chief of staff, had “one or two telephone calls” with Blagojevich between Nov. 6 (two days after Election Day) and Nov. 8, according to the report. Greg Craig, Obama’s incoming chief counsel and author of the report, explained in a conference call with reporters that coincided with the release that the uncertainty arises from Emanuel’s inability to recall whether it was one call or two. Craig said Emanuel gave the same information to the U.S. attorney, and whether there were multiple calls is irrelevant because the calls were appropriate.

Here are the details, from the report:

Soon after he decided to accept the President-Elect’s offer to serve as Chief of Staff in the White House, Mr. Emanuel placed a call to the Governor to give him a heads up that he was taking the Chief of Staff’s position in the White House, and to advise him that he would be resigning his seat in the House of Representatives. They spoke about Mr. Emanuel’s House seat, when he would be resigning and potential candidates to replace him. He also had a brief discussion with the Governor about the Senate seat and the merits of various people whom the Governor might consider. Mr. Emanuel and the Governor did not discuss a cabinet position, 501c(4), a private sector position for the Governor or any other personal benefit for the Governor.

In those early conversations with the Governor, Mr. Emanuel recommended Valarie Jarrett because he knew she was interested in the seat. He did so before learning — in further conversations with the President-Elect — that the President-Elect had ruled out communicating a preference for any one candidate. As noted above, the President-Elect believed it appropriate to provide the names of multiple candidates to be considered, along with others, who were qualified to hold the seat and able to retain it in a future election. The following week, Mr. Emanuel learned that the President-Elect and Ms. Jarrett with the President’s strong encouragement had decided that she would take a position in the White House.

According to the report, Emanuel also spoke four times with John Harris, Blagojevich’s chief of staff, who is also a target of the federal investigation. The conversations took place between the time Emanuel accepted Obama’s offer of the chief of staff position and Dec. 8. The report states that after jarrett withdrew her name from consideration, Emanuel, acting on behalf of Obama, gave Harris other names whom Obama believed to be qualified, including Rep. Jan Schakowsky (D-Ill.) and Rep. Jesse Jackson, Jr. (D-Ill.) and Illinois Attorney General Lisa Madigan.

Mr. Harris did not make any effort to extract a personal benefit for the Governor in any of these conversations. There was no discussion of a cabinet position, of 501c(4), of a private sector position or of any other personal benefit to the Governor in exchange for the Senate appointment.

The report also focuses on a conversation between Jarrett and Tom Balanoff, the head of the Illinois chapter of the Service Employees International Union, in which Balanoff suggested Blagojevich was interested in a cabinet position. During the conference call, Craig said Jarrett thought the notion was “ridiculous” because Blagojevich was widely-reported to be the subject of a longstanding federal investigation.

Ms. Jarrett recalls that Mr. Balanoff also told her that the Governor had raised with him the question of whether the Governor might be considered as a possible candidate to head up the Department of Health and Human Services in the new administration. Mr. Balanoff told Ms. Jarrett that he told the Governor that it would never happen. Jarrett concurred.

Mr. Balanoff did not suggest that the Governor, in talking about HHS, was linking a position for himself in the Obama cabinet to the selection of the President-Elect’s successor in the Senate, and Ms. Jarrett did not understand the conversation to suggest that the Governor wanted the cabinet seat as a quid pro quo for selecting any specific candidate to be the President-Elect’s replacement. At no time did Balanoff say anything to her about offering Blagojevich a union position.

The report corroborates incoming senior adviser David Axelrod’s statements that he mispoke when he told Fox News that Obama had spoken personally with Blagojevich about the appointment and clarifies that contacts regarding the seat were made by Emanuel. The report also states that Obama, Emanuel and Jarrett were interviewed by the U.S. attorney’s office last week. Federal prosecutor Patrick Fitzgerald emphasized during a press conference about Blagojevich’s arrest earlier this month that nobody affiliated with the transition is suspected of any wrongdoing.

While the story is far from over, unless the FBI’s recordings of Blagojevich’s phone conversations reveal something new about Obama, his staff or associates, the transition is unlikely to have much additional new information to offer on the subject.

According to the criminal complaint, on Oct. 31st, Blagojevich was overheard saying of Candidate 5, “We were approached ‘pay to play,’ that, you know, he’d raise me 500 grand. An emissary came. Then the other guy would raise a million, if I made him a senator.”

But federal officials say the recordings did not pick up any conversations with Candidate 5 or the emissary. It’s important to note that this is a third-hand statement: Blagojevich is repeating what he says was the emissary’s description of what Candidate 5 said.

Jackson says he’ll cooperate with the investigation, but hasn’t done anything wrong. These are two separate stories from two different guys, but only one can be right.

According to the FBI affidavit in the case, Blagojevich “stated he might be able to cut a deal with Senate Candidate 5 that provided ROD BLAGOJEVICH” with something “tangible up front.”

What do they mean by “tangible up front?” Apparently the discussion (through intermediaries) revolved around a $1 million cash payment to the governor in return for the Senate post. Yikes!

When ABC asked Jackson if he is, indeed, #5, he said, “I don’t know,” adding that he is “not a target of this investigation.”

Get the popcorn. The fallout from the Blagojevich mess is just beginning.