Injunction Lawsuits have been filed in five cities by the United States to shut the doors of Instant Tax Service (ITS) as well as five owners of ITS franchises, the Justice Department announced yesterday.

In the complaints, the Justice Department accuses ITS Financial and its owner, Fesum Ogbazion, of deliberately ignoring systemic and pervasive fraud by ITS franchisees.

The Justice Department alleges that the franchises deliberately file fraudulent returns for their clients to maximize returns that they in turn charge large preparatiion and “junk” fees for directly against the refund checks. Many times, the Justice Department says, charges for as much as a thousand dollars are taken from the refunds. Many times the clients were not even aware of it happening.

The department alleges tat the franchise owners were aware and in many instances encouraged fraudulent preparations by franchisees. One example given by the department alleges that the owner of several franchises in Indianapolis , one David Franklin, held a two-week training course in 2010 in which his employees were explicitly instructed to prepare fraudulent tax returns.

Losses in taxes from ITS locations in St. Louis, Kansas City, Chicago, Indianapolis, and Las Vegas are estimated at more than $16 million in 2011.

One of the government’s court filings quotes Ogbazion as allegedly saying that he intentionally does not track complaints of fraud made against his ITS franchisees because he “wouldn’t be able to sleep” at night.

According to the government complaints, the defendants in the injunction lawsuits lure their mostly low-income customers by offering loans that the government asserts are false and deceptive. The defendants allegedly encourage their customers to apply for loans knowing that certain customers do not meet the undisclosed criteria to qualify.

The complaints state that when customers apply for these loans – usually before the tax filing season even begins – ITS prepares “estimate” returns based on the customers’ last paycheck stubs. Although customers allegedly believe they are merely applying for loans, the government asserts that ITS franchisees and return preparers routinely file tax returns without having customers’ Forms W-2 and without the customers’ authorization.

The complaint against ITS Financial alleges that it encourages its franchisees to lie to the IRS about the company’s practice of filing returns without Forms W-2.