Ex-President Sahashi claims he is victim of NOVA crash

Ousted NOVA Corp. President Nozomu Sahashi told the Sunday Mainichi in an exclusive interview — the first he has given since the collapse of the English conversation chain — that “before I apologize to everybody, I want to get NOVA back on its feet.”

Sahashi, 56, vanished from public view as NOVA struggled throughout the summer and early autumn months, but despite being accused of mixing his private and public lives too much, he takes a strong stance on his handling of the company.

“I’m being set up as the bad guy,” he says. “I didn’t take a single day off from April as I went around busting my guts to try and get NOVA to rebuild under its own steam. I stopped taking a wage myself from July. If what’s going on now hadn’t happened, I thought I would have been able to get 10 billion yen to get the company back on track. (After I was sacked), there was this sudden liberation from the difficulties of trying to collect money and my mind is still a blur. I still haven’t thought about what I’m going to do from now.”

While Sahashi occasionally smiles during interviews with Sunday Mainichi reporters, most of the time his face remained stern.

Sahashi spoke during sessions conducted at a Tokyo hotel on Nov. 14 and 15. We asked Sahashi if we could take photos, but he steadfastly refused, saying, “I don’t know what face I should put on before the camera.”

Sahashi stood at the helm as the dominant president of NOVA before he was axed on Oct. 26, the same day the company filed for court protection from creditors. He vanished from public view ever since. He did not show himself to the roughly 300,000 NOVA students and employees and publicly was criticized for an “irresponsible” attitude. Receivers have strongly blasted his management and are considering pressing charges of breach of trust against him.

On Nov. 5, Sahashi filed a report with the Osaka District Court in which he denied many of the allegations about him that have been floating in the media in recent weeks. But the 200 minutes he spent with Mainichi reporters represented the first time he had confronted the media since NOVA’s collapse.

Sahashi was particularly vehement in denying claims that he had turned NOVA’s President’s Office into an opulent “secret hideaway.”

The hideaway was a Japanese-style room about the size of 8 tatami mats (around 24 square meters), contained a Jacuzzi and double bed. Receivers said they opened the room to the media because they wanted to show the world how much Sahashi was using the company as his private property.

“The double bed wasn’t for private use, but used as a guest room for visiting VIPs. It was mainly for guests from overseas. Some people are saying it was suspicious because the bed had two pillows, but hotel beds nowadays all have two pillows. This wasn’t the President’s Office. Within the company, we used to call it the ‘Business Center,’ ” Sahashi says.

Sahashi also denies claims that he had several lovers and that he had been involved with many of the women he employed.

“We don’t have secretaries in our company. Considering 80 percent of employees are women, there would be uproar if I ever became involved with a member of staff. As for the reports that I appointed former hostesses as secretaries, all I can say is that I don’t go to the kind of places where hostesses work. There couldn’t be a type further from the clubs of Ginza or Shinchi than me,” Sahashi said.

Sahashi becomes furious when discussion shifts to the G.education group that has bought out NOVA.

“I can’t get it out of my mind that what happened was a planned raid,” he said, each word hissed out with seething anger as he goes on to give his side of NOVA’s collapse.

NOVA’s fall was sparked by a February inspection of the company by the Ministry of Economy, Trade and Industry (METI) following a spate of troubles rising out of the conversation school chain’s contracts with students. NOVA had escalated rapidly, setting up too many schools to be able to provide enough teachers and making it difficult for students to get classes they had been promised. NOVA’s situation worsened in June when METI said there had been 18 cases where the company had acted illegally and banned it from carrying out some of what had been its standard business practices. The ban led to a rush of students leaving the school and made NOVA’s fund-raising a more difficult proposition than ever.

In April last year, Sahashi was ordered to appear before the Osaka Consumer Center to explain how his company planned to avoid further contract problems with students. At the time, Sahashi turned up to a meeting with Osaka Mayor Junichi Seki accompanied by Liberal Democratic Party House of Representatives member Yasuhide Nakayama, which has led to media claims that the ex-NOVA boss was trying to use political strong-arming to influence his fate.

“We never applied any pressure on the mayor. How much influence do you think a two-time Diet member can peddle? Nakayama is my friend and I haven’t made any political donations to him. All we did was pay a courtesy visit to the mayor,” Sahashi says.

Sahashi explains what he did as NOVA was crumbling around him. He says he foresaw NOVA’s revival coming through merging his schools to cut costs and securing funds of 10 billion yen.

“With the merging of schools, I had been negotiating with a conference room rental company about taking them over with no further refurbishment and we were at the stage where we were talking concrete details. I forecast that shutting down schools would have brought in about 3 billion yen or 4 billion yen from returned deposits. My plan was to rationalize 200 to 300 schools from late October to November,” Sahashi says. “As for fund acquisition, I had set up a share warrant where 200 million shares would be issued to two fund companies and the plan was to have 3 billion yen at first in cash by Oct. 26. While searching for capital, I looked at 20 to 30 funds before finally settling on two investment companies based in the British Virgin Islands. I had a plan to increase capital by about 7 billion yen.”

Sahashi is also reported to have been involved with major share market speculator Haruo Nishida, who has been charged by the Osaka District Public Prosecutors Office for trying to manipulate the market. A brokerage industry insider explains.

“Sahashi was in a hurry to get money and saw many assets eaten up by anti-social forces. There are 8 million shares Sahashi had in NOVA that remain unaccounted for and this probably explains why his name has come up (with Nishida). There’s no doubt there was some murky ground in his plans to raise money. The link between Sahashi and Nishida, however, is a mystery,” the insider says.

Sahashi completely denies any relationship with Nishida.

“I don’t know him at all. I checked with the funds and they said he was a complete stranger,” Sahashi says.

Incidentally, Sahashi owned 48 million NOVA shares, or about 72 percent of the entire company. He says he gave an investment consultant 22 million shares from late July to mid-August to use them to try and raise money. He says the allegedly missing 8 million shares arose from this.

“I have no idea who owns them now. They weren’t returned to me by the end of September as promised and the investment consultant said they would be back by the end of October. The shares have been sold for sure, so my only option is to press charges. I realize it’s a bit late now to have them give back worthless shares, but unless I do that there’s no way I can prove my innocence,” Sahashi says.

Sahashi is also furious at the nature of his dismissal, which he calls a “coup d’etat.”

Sahashi says he first heard he had been dismissed as NOVA president at 5:30 a.m. on Oct. 26. He was woken by a phone call from a friend and given the news that he had been fired and NOVA was applying for protection from its creditors.

“I was shocked,” Sahashi says.

Sahashi says that divisions in the NOVA board first surfaced on Oct. 23, three days before he was fired. Sahashi gives his account of a conversation that occurred between himself and another NOVA director on that day.

DIRECTOR: Why don’t we apply for protection?

SAHASHI: We can’t. Why? Because I’ve got something (to raise money) and we can rebuild on our own.

DIRECTOR: Our employees don’t have the power to rebuild the company.

SAHASHI: Maybe we don’t have enough staff, but we can protect our students and employees. Our only option is to rebuild by ourselves.

DIRECTOR: I feel sorry for our employees in the firing line. That’s why we should apply for protection and then rebuild.

SAHASHI: The moment we do that, our students are going to vanish. What are we going to do about the students?

DIRECTOR: Apply for protection and we’ll find a sponsor.

SAHASHI: How will you find them?

DIRECTOR: There’s a bank that says it will help us.

SAHASHI: Which bank? Who have you been talking to?

DIRECTOR: I can’t say.

Soon after this alleged conversation, Sahashi says he received word from somebody who had been closely watching the NOVA executives.

“They warned me that the directors were being shifty. They told me that there was something strange about their behavior,” Sahashi says.

Sahashi says that before NOVA’s collapse, he twice had meetings with G.education, the group that ultimately came in to rescue the failed chain. Sahashi says he met G.education 38-year-old Chairman Masaki Inayoshi for the first time over the summer as NOVA sought a partner to tie up with to raise capital.

“I met Mr. Inayoshi twice, before and after the (mid-August) o-bon holiday. Inayoshi told me that he wanted to exchange shares and that he wanted to be the main shareholder. At that time, he presented me with a proposal where my shares would be split up into about five or six funds,” Sahashi says.

Inayoshi denies Sahashi’s claims.

“In about the middle of August, there was an approach to our shareholder Venture Capital about whether we would like to have a meeting with the NOVA president and that’s how I met Mr. Sahashi on two occasions. We never talked about a capital injection or exchanges of shares. I absolutely did not insist on becoming the main shareholder. I heard that NOVA was in a pretty poor state and told him that it would be extremely difficult for us to cooperate with him,” Inayoshi says.

Nonetheless, Sahashi still seems to feel that he has been set up for a takeover by G.education.

“There are signs that three directors had determined in advance that Oct. 26 would be D-Day, where the president would be fired and NOVA would apply for court protection. Even after I had submitted plans to merge schools and come up with money, the directors just ignored those plans and bought time until D-Day came around,” Sahashi says. “It takes time to apply for court protection from creditors. There’s a mountain of paperwork involved. It’s impossible to just suddenly make an application. NOVA’s lawyers made the application and I was unaware of what was going on. That’s a breach of trust.”

Sahashi maintains his stance that “there was a conspiracy to carry out a coup d’etat.”

“We were having trouble raising cash and were late in paying rents and employees’ wages. I guess the three directors thought the situation was no good. And I think maybe G.education got in on the act then, too. I don’t know which side initiated the conversations, but I have information that the directors were talking to G.education in advance of what happened,” Sahashi says.

Inayoshi once again denies Sahashi’s claims.

“That’s impossible, because we only met the receivers a short while before we were publicly announced as the company’s saviors. We were asked to show our plan to employees. That was three days before we were named to take over NOVA. It’s really sad he thinks he was caught in a coup d’etat and that we were involved in it,” Inayoshi says.

Despite Sahashi’s claims that he is the victim of a conspiracy, he can’t deny that he is suspected of hiding money.

One instance where he is accused of secreting cash away involves Ginganet, a communications company and subsidiary wholly owned by Sahashi and his relatives that owns the patent rights to the TV monitor system the conversation chain used to provide some lessons. Receivers say Ginganet sold the monitors to NOVA at heftily inflated prices to create profits that didn’t really exist. Receivers consider the Ginganet dealings as possible cases of aggravated breach of trust or embezzlement.

Sahashi denies the claims.

“Ginganet developed the systems, but they were assembled overseas by an assembly specialist. The factory is in Thailand. Assembly made up 60 percent of the wholesale cost of the machines and when you add in the commission for the assembler, it went over 80 percent. Put in the development costs and it means that Ginganet was actually selling the monitors at a loss,” Sahashi says.

He continues: “If I had any secret funds, I would have funneled them back into NOVA and rebuilt the company immediately. I used my personal assets, NOVA shares and my shares in other companies as collateral to raise money. Rather than having any secret funds hidden away, I’m a victim in this. I haven’t put a single yen in my pockets,” Sahashi says.

NOVA, however, is not so sure.

“There are absolutely no grounds to back up what Mr. Sahashi says (about Ginganet),” a NOVA spokesman says. “We are considering pressing charges.”

Joji Yabuki, head of the NOVA Seito no Kai, an association of students of the failed conversation chain, insists Sahashi show some sincerity.

“He should hold a news conference and apologize to all of us. If he’s not prepared to put in some of his own money to a fund aimed at helping students made victims by the school’s collapse, it’s hard to see him as being very sincere. There are 300,000 of us who are furious,” Yabuki says.

Sahashi is aware of the anger rising up against him across Japan.

“I have a large responsibility to bear and I sometimes feel like hanging my head in shame. Of course, bearing the ultimate responsibility, I feel absolutely terrible about what has happened to students and staff,” Sahashi says, but he is less forthcoming when asked if he plans to front the media to apologize publicly. “Do you think I’ll be able to finish everything just by fronting a news conference and saying ‘Sorry?’ ‘Responsibility’ for me means the responsibility to rebuild NOVA. How do the directors who proposed the takeover plan to take responsibility? They deserve to die 10,000 deaths!”