Four years after ‘Nova shock,’ eikaiwa is down but not out

Ask any ordinary person what significance Oct. 26 holds and you might find them struggling for an answer, but for many involved in Japan’s beleaguered English teaching industry, it was the day the nation’s premier operator fell into administration and took much of the rest of the industry with it.

This year, Nova marked its fourth anniversary of operation following restructuring, and while Louis Carlet, executive president of Zenkoku Ippan Tokyo General Union (Tozen), admits it has been a long time since the collapse, he feels that the English conversation school (eikaiwa) industry as a whole “continues to convulse.”

Carlet is no stranger to the Nova saga, having been a spectator to it from the start of the chain’s public troubles in early 2007 and the eventual bankruptcy to Nova’s restructuring by Nagoya-based holding company G.Communication in the following years.

Although the media at the time asked Carlet for his thoughts on a seemingly daily basis, he admits it was difficult to get a historical perspective on what impact Nova’s collapse would have on the industry.

“One thing I did say during several press conferences was that the business model of profits over people does not work in the long run,” he says.

Once the Ministry of Economy, Trade and Industry became involved in investigating Nova’s business in 2007, the eikaiwa chain seemingly went from a fully operating business to bankruptcy within months.

During the course of Nova’s downward spiral, the atmosphere at branches took a slightly unusual turn as Nova management, or more specifically then President Nozomu Sahashi, tried to allay instructors’ concerns about delayed payments through bizarrely worded faxes, which instead seemed to have the opposite effect.

Thinking back to those faxes, often referred to as “Jesus memos” for the spiritual metaphors and starry-eyed rhetoric Sahashi utilized, Carlet describes them as “creepy” and says they gave employees the feeling Sahashi “was losing it,” which only further lowered the confidence of everyone involved.

Nova finally collapsed under the weight of its debt on Oct. 26, 2007, though while many knew it was coming, Carlet admits he was surprised to hear that the Nova board had conducted a coup d’etat by holding an emergency meeting without Sahashi in order to fire him and immediately apply for court protection from creditors.

Immediately after, the National General Workers Union (NGWU) [sic] found itself thrust into the difficult position of providing support and advice to Nova’s entire foreign workforce, in addition to dealing with a surge in membership in the hundreds.

The labor group managed to organize the instructors into rallies and visits to the Labor Standards Office, as well as holding seminars to explain the complicated system behind the government’s guarantee that 80 percent of unpaid wages would be repaid in the event of bankruptcy and how to apply for unemployment benefits.

“We did a public relations campaign to make sure everyone in Japan knew how bad it was for unpaid teachers, some of whom had trouble getting food,” explains Carlet, who was then deputy secretary general of NGWU’s Tokyo Nambu branch.

The NGWU attempted to assist instructors in this predicament with a highly publicized “Lesson for Food” program, where private students would compensate an instructor for an impromptu language lesson with a meal instead of the normal tuition fee.

While the union’s intentions behind the initiative were noble, Carlet admits in hindsight that it had the “unintended consequence of lowering the private lesson market rate.”

One senior instructor in western Japan, who chose to remain anonymous for this story, has worked continuously with Nova since years before its restructuring, and witnessed the scaling down of Nova firsthand.

“The old Nova had a hierarchy of supervisors who conducted training and evaluations, called titled instructors, and gave day-to-day feedback on teaching performance,” he explains. “They did not always do the job very well, but as hired so few people, there hardly ever seem to be any lesson observations anymore.”

The instructor describes the current Nova management as “extremely poor,” and while it was not especially good at the old Nova, he feels that the people running the branches now are “much worse.”

“There needs to be a proper system for training and supervising teachers, and while the various companies running Nova want the teachers to get more involved in sales, they have no good ideas about what they want the teachers to do,” he says.

While Nova has managed to pull off the massive feat of restructuring, it is clear that the eikaiwa industry has suffered significant contraction following the collapse, with competing language chain Geos going bankrupt in the middle of 2010.

“The economy is bad and young people’s employment is so unstable that most people have little extra time or money to spend learning a foreign language,” Carlet explains.

Looking to the future, Carlet does not foresee things improving drastically for the eikaiwa industry as a whole, but sees some opportunity for smaller operations.

“To recover, the eikaiwa industry would have to overhaul its business model and take language learning seriously as an educational exercise, treat teachers as long-time careerists and, ultimately, charge more,” he says.

Nova chief’s sentence shortened

The Osaka High Court on Thursday shaved 18 months off the 3 1/2-year prison term of the founder and former president of Nova Corp., who was convicted of embezzling ¥320 million from the defunct English school chain’s employee benefit fund.

The counsel for Nozomu Sahashi, 59, plans to appeal.

Sahashi pleaded not guilty at his Osaka District Court trial and claimed the funds were diverted in an attempt to help the company, not for his personal benefit as charged.

Presiding Judge Sumio Matoba, however, upheld the verdict because the entity in charge of the funds was set up for the welfare of the employees and was thus separate from Nova by nature, ruling Sahashi inflicted damage on that entity.

Sahashi transferred all the funds in the entity to the bank account of a Nova subsidiary in July 2007 to reimburse a flood of students who had decided to cancel their lesson contracts over an advertising dispute.

But the judge shortened Sahashi’s sentence in recognition that his embezzlement was aimed at keeping the company afloat during the management crisis, and that his crime could be construed as containing a beneficial aspect for the employees.

Sahashi launched English conversation classes in Osaka in 1981 and set up Nova in 1990. His venture grew into Japan’s largest English school chain, boasting an enrollment of some 480,000 at its peak.

High Court Gives Ex-Nova President 2-Yr Jail Term For Embezzlement

The Osaka High Court on Thursday sentenced the founder and former president of English conversation school operator Nova Corp. to two years in prison for embezzling 320 million yen of employees’ benefit funds, reducing a lower court sentence of three years and six months.

The defense counsel for Nozomu Sahashi, 59, plans to appeal the ruling as he has pled not guilty to the charge since his first trial at the Osaka District Court, saying he used the funds for the company and not personal benefit.

Presiding Judge Sumio Matoba determined that the accusation was upheld, however, saying the entity in charge of the funds was aimed at the welfare of employees and was separate from Nova by nature, and that Sahashi had inflicted damage to the entity.

According to the ruling, Sahashi transferred the sum accumulated at the entity to a bank account of a Nova subsidiary in July 2007 to reimburse fees students had paid on contracts that they subsequently cancelled.

But the judge recognized in handing down the shorter sentence that the embezzlement was aimed at continuing operating the company amid its management crisis and had an aspect of benefiting employees.

Sahashi launched English conversation classes in Osaka in 1981 and set up Nova in 1990. His venture once grew into Japan’s largest chain of English schools, with some 480,000 people taking language lessons at its peak.

A month after Nova went bust in October 2007, some of its business operation were taken over by Nagoya-based G.communication Co.

In August last year, Nova’s bankruptcy administrator filed a damages suit against Sahashi at the Osaka District Court, seeking about 2.1 billion yen in compensation for breach of trust.

Ex-Nova president sentenced to 2-year prison term for embezzlement

The former president of English conversation school Nova was handed a two-year prison sentence for corporate embezzlement by the Osaka High Court on Dec. 2.

Nozomu Sahashi, 59, had been convicted of the offence by a lower court and sentenced to a three-year, six-month prison term in August last year. The high court decision on Sahashi’s appeal confirmed his conviction for embezzling money from employees, but reduced the sentence as the funds were used to pay back customer deposits and Sahashi did not himself profit from taking the money. Sahashi intends to appeal.

According to the lower court ruling, Sahashi wrote a check for the entire amount in the Nova employees’ Shayu-kai mutual aid fund account — some 320 million yen — and deposited it in an account held by a Nova-associated company.

“The entire purpose of the Shayu-kai was employee welfare, and you used it for an entirely different purpose,” said Presiding Judge Sumio Matoba in the high court ruling. “You were Nova’s primary shareholder, and there is no trace you ever committed to returning the money you took. Thus, this court can conclude that you had criminal intent when you embezzled the funds.”

Sahashi’s defense counsel argued that “The Shayu-kai did not exist as an independent entity, but was just one part of the company. The entire sum withdrawn was set aside for refunding customers, and thus was not embezzled.” Furthermore, “If Nova had not been able to refund its customers, it would have gone bankrupt, and Mr. Sahashi fully intended to return the funds once the company attracted new investment.”

Nova was founded by Sahashi, and at its peak had some 1,000 schools nationwide. However, it was ordered to suspend part of its operations by the Ministry of Economy, Trade and Industry in June 2007. Nova declared bankruptcy in October that year. A suit the company’s bankruptcy administrator filed against Sahashi for the recovery of over 2.1 billion yen is currently being heard at the Osaka District Court.

Foreigners victims, perpetrators of sekuhara

Japan sees progress on sexual harassment, but stories suggest it still has a long way to go

While the Equal Employment Opportunity Law (EEOL) was passed in 1985, it was not until 1999 that revisions to the law included definitions of sexual harassment and legal penalties for employers. These penalties, however, only allow for making the names of the offending companies public. They do not allow for the government to assess fines, nor for plaintiffs to seek punitive damages against the employer — something the U.N. Committee on the Elimination of Discrimination against Women (CEDAW) raised concerns about last year.

There has been, however, an increase in public awareness of sexual harassment in Japan. According to the Ministry of Health, Labor and Welfare, 8,120 women filed sexual harassment complaints with equal employment opportunity offices in 2008, compared with 7,706 in 2004 and 2,534 in 1997.

“Elizabeth” came to Osaka from New Zealand in her early 30s to work for the Nova English-language teaching chain, before its much-publicized bankruptcy and relaunch under G.communication. She had heard the oft-repeated mantra that Japan was one of the safest places in the world. For Elizabeth, however, life in Japan was anything but safe.

The company had housed her in a men’s hostel in Osaka. On her first day in Japan, a man grabbed her arm and pulled her towards him. She spoke no Japanese at the time, and could only understand one word he said: “hotel.” She eventually managed to break his grip and escape.

The harassment and assaults came on an almost daily basis — in the elevator, on the street and on the train. Strange men would ask for her panties — or simply climb up to her second-floor balcony and remove them from her drying rack. Men constantly approached her and asked her to accompany them to hotels; with her long, blond hair, they would assume she was a Russian prostitute, even after she attempted to convince them otherwise. Being molested on the train was a common occurrence — as it is for many women in Japan — and on one evening a man masturbated on the seat in front of her.

Her work at Nova offered no respite. She was assigned to work an 11 p.m. to 7 a.m. shift, providing lessons over the Internet. Men would engage in behavior ranging from taking her photograph to masturbating on live camera. Her complaints to her managers — both Western men — went unheeded. They were clients and they could do what they like, they would say.

On her way to work, a man on the train stuck his hand up her skirt and molested her. She had reached her breaking point. She arrived at her office in tears and told her managers of the assault.

“That’s going to happen a lot to you here,” one of them said, laughing. “You’d better get used to it.”

She had never in her life suffered the level of harassment and humiliation she experienced in those four weeks.

“I never felt so pimped out as I did at Nova,” she says. “The whole system was geared to put white women on show.”

50 Geos branches will be renamed

Nagoya-based investment fund Inayoshi Capital Partners said Thursday that about 50 of its 167 Geos foreign-language school branches will be renamed Nova X Geos after November.

ICP also said it will close down about 20 Geos branches whose business areas are overlapping with those of Nova.

The company said students of those schools will be relocated to the nearby Nova schools or receive lessons via Nova’s unique video-phone system.

Subsidiary Co. “made a comprehensive judgment” on the chain’s operations, ICP spokeswoman Namiko Kameyama said.

G.communication took over the operations of Geos six months ago, after the chain filed for bankruptcy with net debts of ¥7.5 billion.

The corporation purchased Nova in 2007 after that chain went bankrupt.

Retooled English school chains set to launch Nova x Geos brand

Nova x Geos, a new English conversation school brand integrating branches from the Nova and Geos chains, is scheduled to be established on Nov. 1, according to the chains’ parent firm.

Masaki Inayoshi, chairman of investment company Inayoshi Capital Partners, said Wednesday that about 50 of Geos’ 167 branches nationwide would adopt the new brand and start using Nova curriculums.

The Geos branches involved are located in neighborhoods where there is no competing Nova branch.

Inayoshi Capital said it intends to close about 20 Geos branches that do compete head-to-head with Nova branches, and also plans to integrate another 20 Geos branches with cram schools.

Language Schools Nova, Geos Get Yet Another New Owner

Restaurant operator G.communication Co. has sold its subsidiary that runs the language schools Nova and Geos to an investment fund managed by its founder and former chairman.

The Oct. 1 transaction was apparently triggered by the fact that G.communication’s parent company, Foody’s Co., has been hit hard by the recent failure of Incubator Bank of Japan. Investors to Foody’s include businesses with close ties to the bank. Co. had just taken over the operations of Geos this April after the school’s previous operator went belly up. acquired Nova’s operations in 2007 following the bankruptcy filing of the school’s former operator. is now 66% owned by the investment fund, which is headed by Masaki Inayoshi.

Geos, Nova English schools change ownership once again

G.communication Co. has sold off the failed English conversation school chain Geos, which it took over in April, along with the Nova chain of English schools, The Yomiuri Shimbun has learned.

An investment company led by Masaki Inayoshi, who formerly served as chairman of G.communication, purchased the subsidiary of the Nagoya-based firm that ran both Geos and Nova, under a contract that took effect Friday, informed sources said.

Inayoshi’s purchase of the two English school chains followed a decision by Foody’s Co., the parent of G.communication, to withdraw from the operation of Geos and Nova. The decision came in the wake of the bankruptcy on Sept. 10 of Incubator Bank of Japan, the major banking partner of Foody’s, according to the sources.

The failure of the bank gave rise to concern over Foody’s financial management. Foody’s engages mainly in extending financial and human resources backing to restaurants and related businesses, they said.

Nova has 490 locations and Geos 167.

The firm newly in charge of running the Nova and Geos schools says it expects no major problems with their operations, the sources said.