OAKLAND (CBS SF) — San Francisco City Attorney Dennis Herrera has filed suit against an Oakland-based franchisee of Instant Tax Service for a host of alleged illegal business practices that defrauded low-income taxpayers throughout California.

In a 16-page civil complaint filed in San Francisco Superior Court Wednesday, Herrera alleges that one-time Instant Tax franchisee Kebron Daniel engaged in tax preparation and loan-making schemes that routinely skimmed profligate fees from refunds owed to unsuspecting taxpayers—pocketing fees of as much as $1,500 for loans as small as $50.

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Daniel has largely run his seasonal Instant Tax business out of check-cashing outlets in low-income neighborhoods across the state, including locations in San Francisco, Los Angeles, San Diego, Antioch, Carmichael, Compton, Hayward, Inglewood and Martinez.

The tax preparation and loan-making scheme appears to target working families eligible for the Earned Income Tax Credit, a refundable credit under federal law that aims to boost low-wage workers out of poverty. Often lured by the promise of quick refunds or small “refund anticipation loans,” taxpayers hired Daniel’s company to complete and file their tax returns electronically.

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The suit alleges Daniel’s company would usually withhold large, undisclosed portions of the eventual refunds before providing a significantly diminished balance—if anything—to customers.

If Herrera’s lawsuit is successful, it would secure a sweeping court order requiring that Daniel and his corporate alter ego, LILAY, Inc., fully restore all funds defrauded from his customers; pay $2,500 in civil penalties for each unlawful act; pay the costs of Herrera’s lawsuit; and be permanently enjoined from engaging in further unlawful acts.

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