Japanese Lesson: How Do You Say, ‘Taken for a Ride’?

Fresh out of college, Sam Gordon bought a one-way ticket to Tokyo for a chance to explore Japan’s exotic culture while teaching English at the nation’s largest language school. All it took to get the job was one simple interview.

The adventure, which began five years ago, has abruptly come to an end. His employer, Nova Corp., hasn’t paid him since September. The company closed its operations last week and filed for court protection, following a government crackdown on its business strategy. With $20 left in his bank account, the 28-year-old Mr. Gordon says he is living on his credit card.

“At least I have a big fridge and still have some food in it,” says Mr. Gordon. He doesn’t want to go home to Milford, Del., just yet, he says, because he’d have to borrow money for the plane ticket.

Mr. Gordon is one of more than 4,000 foreign-language teachers working for Nova to be slammed by the biggest scandal in Japan’s foreign community in years. The company, renowned in Japan for the hip-shaking pink bunny in its commercials, had been on a hiring binge, setting up recruitment offices in the U.S. and the United Kingdom and prowling college campuses offering jobs.

Nozomu Sahashi, the company’s quirky founder, was fired last week as president and has dropped from sight. Now, worrisome details are trickling out: The 56-year-old executive had quietly moved profits from publicly traded Nova to his private company, a court-appointed administrator alleged at a news conference. The administrators, who are scrambling to find a sponsor to help turn around Nova, showed reporters his lavish office, which has a Jacuzzi, a tea room and a secret bedroom.

Now, the Nova teachers are jobless and those who have lived from paycheck to paycheck are stuck in Japan. Some have been threatened with eviction from their apartments because Nova, which had provided housing and deducted the rent from teachers’ salaries, stopped paying rent months ago. In the past week, 300 Nova teachers have swarmed the usually orderly employment agency office in western Tokyo, called Hello Work, seeking jobs.

One labor union is planning to arrange for teachers in distress to give lessons in exchange for a Japanese bento-box meal. Alarmed that so many of its citizens are affected, the Australian government has struck a deal with Qantas Airways Ltd. to provide discounted one-way air tickets to Sydney.

“I’m not really looking for a new job because the market is just flooded with teachers,” says Matya Sheppard, a 23-year-old Canadian Nova teacher who is dipping into her savings to pay for food and other expenses.

“I have no one to talk to. I’m in limbo,” says Kristen Moon, a 23-year-old teacher from Philadelphia who fears she will lose her Tokyo apartment. Ms. Moon, who came to Japan in May for a “new experience” after graduating from college in New Zealand, is getting along by giving private lessons to several Nova students.

English-conversation schools are a big business in Japan. Millions of Japanese dream of speaking English. But the six years of language classes given in middle and high schools focus on grammar, not conversation, so few children learn to speak English well. The $3.5-billion-a-year foreign-language-education industry teems with more than 1,100 companies catering to about two million students, according to the Japan Association for the Promotion of Foreign Language Education.

The Osaka-born Mr. Sahashi, who founded Nova in 1981, used a particularly inviting pitch. He promised his clients native English teachers at half the price or less charged by rival schools. He touted lessons as cheap as a movie ticket, so students could drop by as casually as if they were going to a bar. There was one catch: To get the cheapest price — about $13.50 for a 40-minute class — students had to pay in advance for 600 lessons.

Armed with a wildly popular marketing campaign featuring a cheeky pink bunny mascot, Nova rapidly opened 900 schools, took on 400,000 students ranging from toddlers to businesspeople and dominated the language-school industry. The bunny, which shook its hips and, in TV commercials, came to the rescue of people who wanted to improve their foreign-language skills, became a nationwide phenomenon. It soon even appeared as a character in videogames. The school’s convenient locations and policy of letting students come in whenever they wanted to were also a hit. Sales reached $500 million in the year ended March 31.

To gather enough teachers, Nova set up nine recruiting centers in cities from Chicago to Sydney, according to the company’s recruiting Web site, now shut down, and posted ads on Internet job sites. Salaries offered were modest — between $2,000 and $2,600 a month — but the hiring process was simple, consisting mainly of a grammar test and short interview, teachers say. “We interview 100,000 foreigners every year,” wrote Mr. Sahashi in a Japanese magazine article this year.

Once they landed in Japan, teachers say they got straight to work. “It was trial by fire,” says Jerry Johnston, a 24-year-old Floridian who started teaching for Nova in July. Mr. Johnston, who was recruited at a career fair at Florida State University, said an experienced instructor watched him teach for a couple of days and corrected him when he spent too much time on any one part of the lesson plan. Then he was on his own.

Students, meanwhile, found it hard to book lessons because there weren’t enough teachers. And when students quit before attending all their prepaid classes, the school recalculated the lessons at a higher rate, thus reducing their refunds.

Thousands of Nova students complained to consumer-protection agencies. In June, the government effectively banned the sale of Nova’s key product: hugely discounted prepaid tickets. Nova quickly ran out of funds, and checks began to bounce in July. On Friday, the company filed for reorganization proceedings, the equivalent of Chapter 11 bankruptcy proceedings.

That has left students like Mari Matsunami with a bunch of prepaid tickets. “I hope a sponsor will come up and continue the operation so I can use up all the tickets,” says the 39-year-old accountant. Ms. Matsunami, who has taken English lessons at Nova for 10 years, says she believes her unused tickets are worth about $1,300.

Many Nova teachers, hoping to remain in Japan, are looking for other jobs. It hasn’t been easy, since most don’t speak Japanese.