When Stephen Varela became president in 2016 of the American Federation of Government Employees Local 2430 in southern Colorado, former union officers say one of the first things he did was ask the bank for a debit card for the union’s account.
Local 2430, a union representing U.S. Department of Veterans Affairs employees, explicitly states in its bylaws that its president and treasurer must both sign checks covering any union expenditures. That way there can be oversight of union money and how it’s spent. Debit cards are not normally allowed.
But Varela, who led the union until 2020 and is now an appointed member of the Colorado Board of Education, didn’t play by those rules, four former union officials and stewards told The Denver Post.
He would take trips to conferences and training sessions around the country — sometimes twice a month — and not turn in receipts for purchases he made with union funds, these employees said. They say he bought $1,800 in beer-making equipment in the name of fundraising for the union without board approval. Unauthorized expenses of union funds began to mount.
“He spent it like it was his personal slush fund,” one former officer said, speaking on the condition of anonymity because they’re still employed by the VA and fear retaliation.
The officers, alarmed, say they faxed 200 pages of documentation in January 2019 to the U.S. Department of Labor, which investigates union corruption. The whistleblowers calculated that Varela spent some $100,000 in unauthorized union money.
A Department of Labor spokesperson said the agency does not confirm or deny investigations. But five current and former union members say federal investigators interviewed them for the probe. One former union officer said the federal agency told them last month that the federal investigation of Varela continues.
Andre Cunningham, the president of Local 1117, which absorbed Varela’s union in 2020, told The Post that federal investigators that year came and took meeting minutes, bank account statements and other pertinent documents related to their inquiry.
“Stephen was not compliant with investigators,” he said.
The Post’s multimonth investigation is based on interviews with 19 current and former union officials, labor organizers and Pueblo community members. The newspaper also reviewed dozens of internal union emails, as well as criminal and civil court records and documents filed with the Colorado Secretary of State’s Office.
Varela, in a brief phone conversation last month, told The Post that he was not aware of any investigation into his union activity. He called the union allegations “fabricated” and “baseless” and said he left the union in “good standing and with a clean record.”
A 2019 audit report from the American Federation of Government Employees, provided by Varela, states that receipts, disbursements and cash were accurately reflected in the union’s records. He did not provide audits from other years.
Varela also provided some documentation that union leadership cleared him of any wrongdoing. A May 2019 email from a national vice president shows the union found “no probable cause in the charge of misconduct relating to… expense misappropriation” for the previous year.
A spokesperson for the Colorado Department of Education said the board is unaware of any investigation into Varela but would work with authorities if contacted.
The revelation of the federal probe, which has not been previously reported, comes as Varela has slowly climbed the ranks in Colorado’s political world. He ran unsuccessfully in 2022 for state Senate and was in contention to be the next chair of the state’s Republican party. A GOP vacancy committee in January 2023 appointed him to the state Board of Education, where he represents the sprawling 3rd Congressional District.
Varela last month announced his candidacy for U.S. Rep. Lauren Boebert’s congressional seat after the congresswoman said late last year she would run in a different district.
His ascent, though, has been marked by controversy and allegations of improper behavior — both at the helm of the union and during his runs for political office.
“You sacrifice a lot and you feel underappreciated,” Cunningham said about the nature of union work. “My own assessment: You think you’re making up for what you’ve lost.”
Colorado Board of Education board members Stephen Varela (R), right, and Dr. Angelika Schroeder (D) during a public meeting at the Colorado Board of Education in Denver on Wednesday, Jan. 10, 2024. (Photo by Andy Cross/The Denver Post)
“It wasn’t a union anymore”
Norms quickly started to change inside Local 2430 when Varela, then a VA social worker, took over in the fall of 2016, former union members say.
The union, which counted more than 200 federal employees as members, was in the midst of another scandal. Varela’s predecessor, Ashley Jacobson, was under investigation for — and was later charged with — felony theft following a federal Department of Labor investigation.
A subsequent probe by the Colorado Springs district attorney found Jacobson racked up more than $5,800 in fees with union money and misused union travel expenses, according to her arrest affidavit. She pleaded guilty in 2018 to misdemeanor theft and received a deferred sentence. (Jacobson died in 2021.)
But union officers say Varela took Jacobson’s improper behavior to a different level.
Some members of the executive board told Varela that he needed to get rid of the debit card since it went against union bylaws, former union officials told The Post. The secretary-treasurer even destroyed the debit card Varela gave them for the same account, they said. But Varela wouldn’t give it up, multiple former union officers said.
Union rules dictate any expenses totaling $50 or more per month must be approved by a quorum of the local’s membership, and all expenses must be paid for using checks with the two signatures. But Varela would just charge the debit card without authorization, the former union officers said. The secretary-treasurer, who is supposed to co-sign checks with the president, would often only find out about charges on monthly bank statements after the fact, they said.
Previous presidents might attend one training or conference a year, union officials said. But Varela would go monthly, sometimes more. And despite strict federal guidelines governing per diem and lodging expenses for federal employees, Varela would charge more expensive hotels and rent cars on the union’s dime — something his predecessors did not do, the union officials said.
Internal union emails reviewed by The Post show officers and other members raised concerns to Varela and the American Federation of Government Employees’ regional leadership throughout his tenure.
“I hope we are not repeating the past,” a union steward wrote in one 2017 email, expressing concerns over expenses from that year and the 2018 budget. “There are a lot of members who are putting their money and trust in us.” (The Post interviewed this individual but, upon their request, is withholding their name because they are still a VA employee and fear retaliation.)
In October 2019, the same steward asked Varela to explain a large decrease in funds from the union’s checking account.
Department of Labor documents show Local 2430 started the year with nearly $83,000 in the bank. That year, the union spent more than $96,000 but only took in $46,595 in dues. The local ended 2019 with $33,255 in the bank.
In an email to American Federation of Government Employees leadership that year, one of the union’s officers pleaded with higher-ups to do something. They listed a litany of concerns with Varela’s management, including allegedly falsifying executive board minutes after the fact to cover his expenditures, using this unauthorized debit card and spending union money with “no regard for the budget and what is best for members.”
Varela’s “behavior is more that of a dictator and not a union president,” the officer wrote. (The Post also interviewed this individual but is withholding their name because they are still a VA employee and fear retaliation.)
“We came to you for assistance; sometimes a bad egg gets elected… we needed your help,” the email reads. “We needed national AFGE to step up and protect other members from him.”
Multiple union members said they recall Varela brazenly acknowledging his behavior.
“Ashley (Jacobson) was stupid,” Varela said, according to interviews with two former members and a 2019 email, reviewed by The Post, from an officer to regional union leadership. “I’m not going to get caught.” Varela did not answer questions from The Post about this statement.
The American Federation of Government Employees, though, did not stop his spending habits, these former union officials said. National union representatives did not respond to repeated requests for information about any internal probes of Varela or Local 2430.
In 2020, Local 2430 disbanded, merging with Local 1117 in Denver. Union leadership said the merger had nothing to do with the misappropriation allegations, but rather due to executive orders from President Donald Trump aimed at curtailing union power.
That April, investigators from the Department of Labor came calling to union leadership. They took meeting minutes, bank account statements and other pertinent documents related to their investigation into Local 2430, said Cunningham, Local 1117’s president.
But the feds had a problem. Cunningham said his local didn’t have access to certain bank accounts that were turned over when the locals merged.
“They tried profusely to get information from Stephen to access the bank accounts that he had turned over to us,” Cunningham said. “All their requests fell on deaf ears.”
Before the newly merged union could access those funds, Varela had to relinquish authority over the accounts. He wouldn’t, Cunningham said.
“We couldn’t log into (certain) bank accounts to do our own assessment,” he said.
The feds returned the union’s books to Cunningham eight months later, in January 2021. During the entire investigative process, Varela would not return Cunningham’s calls, he said.
That left Cunningham and his union responsible “for cleaning up his mess.”
“If you have nothing to hide then you should have no problem communicating,” Cunningham said.
Varela didn’t answer questions from The Post about Cunningham’s allegations.
Court records show Varela has dealt with money issues in recent years.
The Colorado Department of Revenue entered judgments against him twice in 2021, totaling more than $2,500 in unpaid taxes. In 2017, a Pueblo private school sued Varela and his wife for defaulting on more than $4,000 in enrollment fees, court records show. The couple paid and settled the claim the following year.
Political ambitions and campaign accusations
As allegations mounted and Varela’s local wound down, the former union president pivoted to politics.
In 2019, he ran unsuccessfully for Pueblo City Council. Three years later, he lost a race for a state Senate seat. Last year, a Republican vacancy committee appointed him to serve on the Colorado Board of Education. Now Varela is jockeying for Boebert’s soon-to-be-open seat in the 3rd Congressional District.
His political ambitions, though, have been marked by unusual controversy.
State records show Varela has changed his party affiliation 18 times since 2011, flipping between Republican, Democrat and unaffiliated. He once changed his party registration twice in one day. Two days later he flip-flopped again.
Varela told The Post in an email that he remembers switching parties three or four times to vote in primaries but is “not aware why records showed 18 such party switches.” (Colorado switched to open primaries in 2018; records show Varela switched his party affiliation three times since then.)
He’s been a registered Republican since 2021.
In March and September 2022, Republican and Democratic political operatives filed separate complaints with the Secretary of State’s Office, accusing Varela of campaign finance and practice violations.
At the time, Varela was running as a Republican for state Senate District 3. The GOP consultant, Tammy Klein, alleged Varela told people he was actually running for Pueblo County commissioner and had accepted donations supporting his run. He never filed the necessary candidate affidavit to run for county commissioner, according to the complaint. An ad even appeared in a Pueblo theater playbill promoting Varela’s run for county commissioner.
Republican state Senate candidate Stephen Varela addresses the crowd during a campaign rally in Pueblo on Thursday, Oct. 20, 2022. (Photo by Zachary Allen/Pueblo Chieftain via AP)
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Varela told investigators he never ran for the county commissioner seat and never accepted any donations for that run.
The secretary of state dismissed both complaints. But the candidate’s explicit statements in the Klein case were “at best, disingenuous,” election investigators wrote.
Varela’s actions warranted further investigation, the office said, but Colorado law didn’t allow investigators subpoena power at this stage of a campaign finance proceeding. The deputy secretary noted the Varela case as a “particular example of the inability of the division to fulfill its constitutional obligation of ‘strong enforcement of campaign finance requirements.’”
Varela will stand for his first Board of Education election in November, pending his congressional run (the Republican primary is June 25). But Pueblo union leaders and community members say Varela doesn’t represent their values.
Hilary Glasgow, president of the AFL-CIO Southern Colorado Labor Council, dealt with Varela through their work with the council. She called him a “snake oil salesman.”
“He skirts around the law all the time,” Glasgow said. “The things he does, he’s not doing it for some noble cause. He’s not skirting the law to make things better — he’s doing it so he can get more power and prestige.
“His noble cause is himself.”
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