Nova

About 750,000 Japanese paid for evening and weekend language lessons last year, nearly two-thirds of them through Nova.

Teaching English in Japan, a popular first job for western university graduates, has become dicier proposition. Nova, the dominant force in Japan’s $1.2bn-a-year private language-teaching business, has filed for court protection from creditors after scandals and lawsuits drove away tens of thousands of students.

The company, which is Y44bn (?266m) in debt, had closed dozens of its 900 schools and missed salary payments to some 4,000 instructors from the UK, the US, Canada and Australia.

Critics blame an aggressive expansion campaign by Nozomu Sahashi, founder and chief executive, for overstretching Nova’s resources. Mr Sahashi was fired by the board of the publicly listed company.

About 750,000 Japanese paid for evening and weekend language lessons last year, nearly two-thirds of them through Nova. Mr Sahashi founded the company in 1981 after returning from studying in Paris. The chain’s bright blue signs are ubiquitous around urban train stations, which sometimes sport a Nova outlet at more than one exit.

Nova has reported a net loss in each of the past two years and has been struggling under a government ban. The recruiting of new students by Nova was prohibited in response to claims that it had failed to disclose a chronic shortage of lesson spaces. Courts have also ordered Nova to refund millions of yen in pre-paid fees that the company claimed had been forfeited by dropouts.

A court-appointed receiver will assess the company’s assets and seek financial sponsors to help turn the company round. Failing that, the chain could be sold or liquidated.

Paul Dorey, an official at a union that represents some Nova instructors, said: “It’s been a vicious circle for a while. They couldn’t find enough teachers, so students couldn’t book lessons at peak times and would quit.”

He said foreign staff risked losing company-sponsored housing after Nova stopped paying their rent. “Some teachers have already received eviction notices. It’s a total mess.”

Nova and other English schools fill a gap left by Japan’s education system, which does a notoriously poor job of training students to speak the language.

Only nine of 147 countries ranked lower than Japan last year in average scores on the widely used English language proficiency test run by the Educational Testing Service of the US.

http://www.ftd.de/karriere_management/business_english/275232.html

No refunds offered in partial deal

Nova Corp.’s court-appointed administrators plan to sell 30 of the failed language school chain’s 670 branches to G.communication grp. and liquidate the rest, making tuition refunds very unlikely.

Nagoya-based G.communication, which also runs cram schools and restaurants, said the takeover would happen immediately with an eye to resuming lessons and eventually running as many as 200 of the bankrupt Osaka-based chain’s schools. It reportedly plans to accept paid-up Nova students and offer them classes at a discounted price.

“Our company has been unofficially selected to become a sponsor in order to fund Nova’s operations,” G.communication said in a press release late Tuesday without specifying details of the deal, which was announced before it could be approved by the Osaka District Court.

According to the statement, the schools would be taken over by G.communication’s wholly owned subsidiary, G.education Co., which runs 42 English conversation schools under the EC Inc. brand mainly in Hokkaido. It will initially take over 30 of Nova’s schools but reportedly plans to run about 200 Nova branches under their original brand.

Nova’s court-appointed administrators had been under pressure to find a sponsor quickly to assume some of its previously estimated ¥43.9 billion in debt, including¥4 billion in unpaid salaries.

One of the administrators said a deal had to be made quickly because Nova’s corporate value was plummeting. Under the Corporate Rehabilitation Law, revised in 2003, a failed firm can sell its operations on the basis of brief court permission, even if its reconstruction program has not been approved.

As for the at least ¥4 billion in salaries owed to Nova’s 7,000 employees, including some 4,000 foreign teachers, some of whom haven’t been paid since August, Nova has said it will pay part of the money owed by using government money. But how much each teacher will get and when are causes of concern, said Koji Yamahara of the Osaka-based General Union, which represents some Nova workers.

“The unpaid salaries will come from public funds. But there is a maximum payout limit and it will take at least six months for Nova staff to get even a portion of their back wages,” he said. “Many staff members are now hurting financially. They should receive immediate payment of what they are owed.”

The General Union is warning of further trouble and chaos unless the new sponsor quickly clarifies how it will deal with the unpaid wages.

But the decision to offer a discount to Nova’s students instead of refunds was criticized by the union, which said it will pursue the case in court.

“The decision (by G.communication) not to return any money to Nova’s students is cruel,” Yamahara said. “The union will continue negotiations on this matter with the court and the government.”

One of the administrators said the Nova failure is likely to go down as the one that caused the most financial damage to “the largest number of creditors,” in postwar Japan.

G.communication has agreed to allow Nova’s students to buy the same kind of lessons they were taking at Nova for about 25 percent of what they paid there.

Dennis Tesolat, the General Union’s general secretary, said the details about re-employing Nova teachers also needs to be clarified.

“Both G.communication and Nova’s court-appointed lawyers have said that all of those who want to be re-employed will be. But how are they going to ensure this happens and under what conditions will the teachers be employed? This remains unclear,” Tesolat said.

But Jamie Scarrabelotti, who used to work at a Nova multimedia center in Osaka, said most Nova staff he knows were skeptical about the prospects of finding new employment and getting their wages paid. “We’ll try to get our owed wages, but, frankly, I don’t think many Nova teachers expect to get fully reimbursed,” he said.

On Oct. 26, Nova filed for protection from creditors and completely shut down operations, putting nearly 7,000 employees out of work and leaving nearly 300,000 students in limbo.

In Tokyo, Toby Gummer, a Nova teacher who visited a public job security office, said the bankruptcy announcement should have come earlier.

“They knew they didn’t have money several months ago. They should’ve declared bankruptcy then,” said Gummer, an Aussie who taught English for more than three years for Nova in the Akasaka district.

He said many Nova teachers are in financial difficulty and have started thinking about going back to their home country, including himself.

“I think I have to go home next week,” he added.

http://search.japantimes.co.jp/cgi-bin/nb20071108a1.html

A New Zealander in Japan was forced to dip into his savings and move house after a “tightening up on photocopy paper and lightbulbs” tipped him off that the country’s largest chain of English language schools was in financial trouble.

Cole Cameron, who moved to Japan 18 months ago to work for Nova, said he had to find a new job and was $8000 out of pocket following the collapse of his former employer.

The 23-year-old, originally from Havelock North, is one of about 200 New Zealanders affected by last week’s collapse, with many left stranded and owed money.

Mr Cameron told the Herald from Saitama Prefecture that he had managed thanks to “conservative financial management”, savings and backing from his parents in New Zealand should he need it.

He said the situation at Nova had been noticeably deteriorating for the past five months, since he first noticed tighter measures on stationery.

Employees who had accommodation arranged through Nova started experiencing problems shortly afterwards.

“Rental fees weren’t being paid even though they were deducted from the salaries. Our salary paper said we’d paid the rent but it hadn’t been passed on to the landlord.”

Mr Cameron was in Nova accommodation, but saw a risk and moved into his own accommodation. He said different levels of staff were affected at different times.

“The bulk of the regular instructors were the last to have their contracts breached,” he said.

“It started off with the Japanese staff having their contracts breached in August by failure of payment, then the management, which included foreigners and Japanese, had their contracts breached in September where their salary was two weeks late.

“And then everybody had their contracts breached in October with failure of payment and we haven’t been paid yet.”

But despite being owed $8000, Mr Cameron said he would not let it ruin his stay.

“My personal view is you can’t sit around and cry over spilt milk. You’ve just got to get on with it, and I’ve been fortunate in the sense I took that attitude a long time ago and went and got another job.

“Some people only got that attitude over the weekend and have found there’s nothing there. It’s a difficult situation all round.”

He started a new job teaching English this week, but it’s been tough financially.

“There’s obviously still that gap of two months’ salary [plus owed leave]. I’m getting through, but essentially I need that two months’ salary.”

Mr Cameron, whose last day at Nova was October 25, said it was possible he would get some of his money back because Nova salaries were government insured, but he wasn’t holding his breath.

“This situation highlights the importance of careful planning and risk management for anybody travelling overseas.”

He said one of the most annoying things was the lack of information about what was going on.

“A lot of the Western folk jumped ship the day after we weren’t paid and some of them have just left the country and the company is none the wiser.”

The New Zealand Embassy in Tokyo said it received a steady stream of calls from New Zealanders caught up in the situation, and was offering advice, but not financial assistance.

Last Friday, Nova dismissed co-founder Nozomu Sahashi and filed for protection from creditors with the Osaka District Court. Its debts are estimated to be 43.9 billion yen ($500 million)

The company was founded in 1981 and relentlessly expanded, working towards its goal of 1000 schools nationwide.

Nova had 300,000 students at about 670 schools. It employed about 7000 staff, around 4900 of whom were foreigners.

http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10474346

When Natasha Steele came to Japan from her native Australia earlier this year to teach English, she was looking forward to immersing herself in a foreign culture while earning a little money on the side. Now, after the spectacular collapse of her employer, Japan’s biggest English language school chain, Steele has found herself jobless, threatened with eviction and hungry. “I was taken out and afterward, she took me to a bakery and told me I could have anything I wanted,” she says of one charitable student. “She just wanted to know I had enough food for at least two weeks.”

For many college graduates from English-speaking countries, spending a few months in Japan teaching English is a time-honored tradition. But after Nova shut the doors of its more than 800 locations worldwide last week, that tradition is looking precarious. The closure has left over 300,000 Nova students deprived of their prepaid English lessons, and many of its 5,000 foreign language teachers, like Steele, unlikely charity cases.

Nova, started by CEO Nozomu Sahashi in 1981 upon his return from studying in Paris, grew into a publicly listed chain with over 900 locations at its peak. But things started to unravel for the company in April, after Japan’s Supreme Court sided with a former student who sued the school over tuition refunds. Its rapid expansion had been funded largely through a prepaid credit system, where students bought thousands of dollars worth of lessons up front and received only partial refunds in the event of midterm cancellations. A subsequent government investigation led to a partial suspension of Nova’s operations, at which point hundreds of thousands of students demanded a refund on their prepaid tuition. The result was the equivalent of a bank run: as students rushed to close their accounts, the company fell some $380 million in debt and in October filed for corporate rehabilitation, the Japanese equivalent of chapter 11 bankruptcy. This has made it impossible for Nova’s creditors ? mostly students and teachers demanding tuition refunds and unpaid wages ? to collect their money. For the unsuspecting teachers, this has meant a crash course in Japanese labor law. Several have taken to the streets, leading demonstrations against Nova and Sahashi, while others have held press conferences accompanied by teachers’ union representatives ? Kristen Moon, a freshly arrived American, even appeared dressed as Nova’s corporate mascot, a pink bunny rabbit that has become famous through Nova TV commercials aired across Japan. Some airlines have offered discount flights home for cash-strapped teachers, while embassies have opened hotlines to aid their near-homeless citizens. Former Nova employees last week announced a “lessons for food” program, which would allow students to pay for lessons in meals and food items. Meanwhile, the sheer number of out-of-work teachers have glutted the local labor market for English instruction, causing other language schools to stop accepting applications.

The troubles for Nova don’t end there. A report by court-appointed lawyers investigating the case alleges that founder Sahashi ? since fired by the board and currently in hiding ? had turned his company into something of a personal piggy bank, lining his pockets through such ruses as buying teaching equipment from affiliated companies and selling them to Nova students at grossly inflated prices. He is also suspected of insider trading, misappropriation, and aggravated breach of trust. (Sahashi’s representative has filed a petition refuting such claims.) On Oct. 30, one government lawyer invited reporters to check out the lavish office at Nova’s Osaka headquarters ? complete with a fully stocked wet bar and a hidden bedroom and sauna. “Sahashi is still attempting the sell company shares in hiding. I wanted to show the extent of his misdeeds,” said Osaka attorney Toshiaki Higashibatake, who organized the event. Under Japanese corporate law, Nova can stay intact if it can find sponsors to underwrite its current business. But the company is losing money so rapidly ? its market value has been halved since filing for bankruptcy ? that the search for financial sponsors has been rushed, with proceedings expected to conclude later this week. If it fails to find sponsors for a bailout, Nova faces liquidation.

It’s unlikely that the scandal will put an end to Japan’s $1.2 billion foreign language education industry. Despite a widespread appetite for learning and an educational system that mandates six years of English study, Japan ranks below North Korea on standardized English proficiency tests, according to the U.S.-based Educational Testing Service. All that is small comfort, however, for teachers who share Steele’s plight. Said Moon, the bunny rabbit at the press conference: “I love this country, but I’m in limbo and my life is on hold.”

http://www.time.com/time/world/article/0,8599,1680652,00.html

The tragedy of the English-teaching company Nova is a gripping and revealing one. That students should have their fees returned and teachers and staff be given their salaries should go without saying. That the company had serious management and leadership problems should be equally obvious. Still, the Nova episode is reason to consider several aspects of Japanese society that shaped the rise and fall of one of Japan’s best-known companies.

Before the revelations of so many problems, Nova seemed a clear example of the best side of Japanese economics. The company started with little more than rent for “ekimae” (station-front) office space and a cute pink bunny icon for advertising. That a multibillion yen business could still be built from the ground up seemed to show that Japan’s system was not too rigid to allow innovation. Yet, the sad ending shows that the system is not so lax that improprieties can continue forever.

Apparently, Nova’s rise depended on alleged high-level contacts with various ministry-connected foundations and large investments by risk-taking entrepreneurs. Without that, and a reputedly autocratic management style, Nova could not have expanded so rapidly. The company, however, seemed unable to transform its initial pride and appeal into consistent strength and lasting quality. Ultimately, a combination of a good product, competent management and consumer-friendly attitude is the best business model.

When things go wrong for companies without those qualities, consumers are especially unforgiving. Nova did not endanger the health of children or potentially poison anyone, but their betrayal of trust is inexcusable. The outrage of students, who handed over their hard-earned money, and teachers and staff, who gave precious work hours still uncompensated, seems more than justified. As if acting out some ancient tragic drama, excessive pride blinded the company’s management to internal problems that were obvious to everyone else.

The estimated figures splashed across front pages are startlingly high. The outstanding debt stands at ¥40-plus billion. The language learning industry in Japan is a highly profitable one. People are willing to pay, but usually seek a balance of price and value. Surely the wiser students must have tried to find the best teachers and arranged their schedules accordingly. Yet, even these savvy consumer/learners were cheated in the end. Discount education simply does not work.

The figure of 300,000 students nationwide is almost as staggering. That number means Nova is perhaps the largest language-education provider in Japan. Ironically, most of the students attending Nova had already received the mandatory six years of English language education through high school, and either wanted more or needed more instruction. The education ministry should be reminded that something in language education is sorely lacking. It seems almost as if the public schools have simply been prepping students for Nova!

Beyond the problems of one company, these student numbers reveal how strongly people want to speak another language. Studying a language requires time and money, and clearly, people were ready to invest both. The broad awareness of the linguistic demands of globalization and the desire to get beyond the boundaries of Japan, if only for a couple class hours per week, are remarkable. Students genuinely put their money where their mouths were.

At the same time, this episode has revealed the large number of foreigners willing to come to Japan. As they go about the difficult task of recovering their wages and start to look for other jobs, they will be deciding whether to stay longer or give up and go home. One imagines them all listing their phone numbers outside the scores of now-closed schools to arrange private lessons. At the high point, over 6,000 foreign teachers were recruited to work at Nova. They may have come as a lark, but formed part of Japanese society for the time they were here. In this regard, Nova was a powerful force for internationalization.

Whatever the future holds for Nova after its bankruptcy filing and management restructuring, the need for English lessons will not disappear, nor will the push for internationalizing somehow reverse. Some students may give up, but most will continue to study in other ways. That English language study has become such an important part of Japanese culture is no surprise, but its vast scope, not to mention its profitability, still amazes. Nova may have exploded, or imploded, but the positive reasons for its rise will remain and begin to establish new and better approaches to learning English in Japan much sooner than we might imagine.

http://search.japantimes.co.jp/cgi-bin/ed20071104a1.html

On [deposed Nova Corp. president Nozomu Sahashi’s] desk sat the company’s mascot–the bright pink Nova usagi, a bunny with long ears and the beak of a bird. The ears and the beak are said to symbolize the basics of mastering a foreign language, which are to listen a lot and speak a lot.

The animal is completely guiltless, of course, but I imagine many people must feel angry every time they look at its innocent face.

But Sahashi apparently has no ears to listen to these people’s angry shouts, nor a beak-mouth with which to utter words of apology.

http://www.asahi.com/english/Herald-asahi/TKY200711030050.html