Ex-lawyer testifies in own defense
By Rebecca Boyle, (Bio) rboyle@greeleytribune.com
August 24, 2006

Greeley Tribune, CO
Aug. 25, 2006

A former Greeley attorney who was disbarred twice for mishandling
client funds is on trial this week for theft from a former client
who alleges he bilked her out of $68,000.

Michael A. Varallo, 58, is representing himself in the felony case,
in which prosecutors allege he misused the client’s money and didn’t
repay her as promised.

Varallo testified on his own behalf for much of Wednesday afternoon,
saying he has made mistakes in the past, but he is innocent in this
case. He said the $68,000 was a loan.

Prosecutors say Varallo took money from Lenora ‘Jane’ Pulos and used
it to pay personal expenses and debts to other clients.

He was supposed to keep $3,000 for a retainer, use other funds to pay
Pulos’ fines stemming from her handful of criminal cases, and return
the rest to her after her release from jail.

Varallo disputed that on the witness stand, where he talked directly
to the jury and told his version of events.

He said he accepted $68,000 from Pulos just before his second
disbarment in 2002, which he’d planned to appeal at the time. It
could take up to a year if he was granted a stay, and he thought he
could work for Pulos during that year.

But then he changed his mind about the appeal because he was upset
about failing to adequately represent a family in immigration court,
which prompted his disbarment.

"I was crushed," Varallo said. "I had made a mistake and it had
hurt people."

So he told Pulos he was quitting law for good. She wanted him to
continue helping her anyway, Varallo said. She told him to use her
$68,000 to help close his practice, pay off other loans and help
represent her, refunding the loan later.

"To this day, I wish to God I had said, ‘No, I don’t want to touch
your money,’ " Varallo said. "I wish I hadn’t been tempted, but I was."

Varallo said he and Pulos agreed in late 2002 that he would pay her
back overtime. By summer 2004, Pulos intimated that Varallo owed her
about $25,000, after working off some of the loan and making payments.

In fall 2004, Varallo heard a rumor through Pulos’ ex-husband that
Pulos planned to go to the police, so he confronted her.

"I said, ‘Are you playing games here? Are you gonna try to screw me
around?’ " Varallo recalled, adding that Pulos said, "No."

He said he didn’t expect her to renege on her loan.

After two years of Varallo sending occasional checks or wire transfers
through Western Union, Pulos went to the Greeley Police Department
to report the theft.

"I helped keep her out of prison, and what’s that worth?" he said,
recalling work he had done for other attorneys on her behalf after
his disbarment.

In April 2005, after Varallo sent Pulos three letters trying to work
things out, he visited her. She told him he owed her $68,000 plus
$5,000 interest.

"She said, ‘You know, I’m going to make your life (expletive)
miserable,’ " Varallo told the jury. "And she’s right; she has made
my life (expletive) miserable."

He said if Pulos had only agreed on a number, he would have been able
to pay her back by summer 2005.

The trial will continue this morning, and it may wrap up by the end
of the day.

VARALLO’S DISBARMENT

Michael Varallo has been disbarred twice for mishandling client funds
and not fulfilling his duty. He was initially disbarred in February
1993 and was readmitted in October 1999.

In December 2002, he was disbarred again after improperly controlling
funds from an Armenian family who faced deportation, and failing to
complete a domestic relations order on a different client’s behalf.

"In both cases, Varallo’s misconduct caused and exposed his clients
to serious injury," the disciplinary judge wrote in disbarring Varallo.

The decision said he intentionally deceived clients, made false
statements, incompetently represented his clients and "prejudice(d)
the administration of justice."

Source: Colorado Bar Association, Tribune research