Nozomu Sahashi, the founder of the failed NOVA Corp., has been questioned for breaking the Labor Standards Law by failing to pay his employees, government sources said.

Officials of the Osaka Labor Bureau of the Health, Labor and Welfare Ministry questioned Sahashi, 56, last Monday. They are considering whether to file a criminal complaint with law enforcers, accusing him of violating the Labor Standards Law.

During questioning, Sahashi admitted that the company failed to pay wages to employees. “We tried to raise the money to pay wages by all means, but we couldn’t,” he was quoted as telling bureau officials.

NOVA’s financial situation took a dive after the Economy, Trade and Industry Ministry imposed a six-month ban from making long-term contracts with students in June for its unfair business practices.

It has not paid salaries for September and October to Japanese employees and wages for October to instructors. The unpaid wages amount to about 4 billion yen.

http://mdn.mainichi.jp/national/news/20071103p2a00m0na004000c.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

Five companies affiliated with Ginganet Corp., owned by former Nova Corp. President Nozomu Sahashi, obtained 4 billion yen in loans from failed Ishikawa Bank in return for cooperating with the bank’s illicit transactions, The Yomiuri Shimbun has learned.

After the bank went bankrupt in December 2001, Osaka-based Ginganet’s funding situation got worse. A court-appointed administrator of Nova said Ginganet–a communication network service firm–had earned billions of yen by selling IP videophones to Nova at inflated prices. It is believed that Sahashi was trying to raise funds for repayment of loans by Ginganet, which was facing financial difficulties, by overcharging Nova for the IP phones.

Nova filed for court protection under the Corporate Rehabilitation Law on Oct. 26.

In-house documents of the bank, based in Kanazawa, said it extended loans of 25.4 billion yen to several Nova-affiliated companies and the five Ginganet group companies between March 2000 and September 2001. In return, the companies helped the bank increase its capital by 13 billion yen using some of the loaned money.

The Ginganet group companies obtained at least 4 billion yen in loans from Ishikawa Bank on the pretext of purchasing terminals for the IP videophone system, while the group companies took up 521,500 shares in the bank, worth 2.01 billion yen.

The Company Law and other legislation prohibit transactions in which a firm extends a loan in return for capital investment.

During a trial of some former Ishikawa Bank executives who were charged with aggravated breach of trust, prosecutors detailed how some of the bank’s capital increases were based on illegal transactions.

It is believed the then Ishikawa Bank president and others asked Sahashi and Nova advisers to help the bank increase its capital. Sahashi is believed to have accepted the request on condition that the bank extended loans to Ginganet that exceeded its investment in Ishikawa Bank.

According to sources close to Ginganet, Sahashi used to say, “I want my own bank.”

The fact that Ishikawa Bank filed for insolvency with the Financial Services Agency in December 2001 despite efforts to rehabilitate itself left the Ginganet group pressed to repay a huge amount of loans.

According to Nova’s administrators and other sources, Ginganet began to sell a new model of IP videophone from July 2002, immediately after the bank’s failure. It sold them to Nova at a price several times greater than cost, earning billions of yen over five years.

Ginganet was able to repay the loans rapidly even though selling the IP phones was its only source of income. Ginganet’s debt to Ishikawa Bank was taken over by a regional bank. By April it was down to 250 million yen, indicating that most of Ginganet’s profits were being allocated to loan repayment.

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Nova instructors forced to vacate

OSAKA–Many foreign instructors working for troubled English language school operator Nova Corp. have been asked to vacate their apartments, rented by Nova, due to arrears of rent.

Preservation administrators of Nova, which has filed for bankruptcy protection, have asked the landlords to wait until a corporate sponsor is found for the firm. However, some instructors have already been evicted, unable to make ends meet without salaries.

Many instructors are waiting in hope for the firm to enter the rehabilitation process, but others have decided to return to their home countries.

“You have to leave the apartment, or we’ll stop the electricity and gas, and change the lock,” a real estate firm employee told Canadian Nova instructor Stephen Clarkson on Oct. 27, the day after Nova filed for court protection under the Corporate Rehabilitation Law, at his apartment in Abeno Ward, Osaka.

Clarkson’s landlord presented him with a document stating that he would agree to vacate the apartment by Sunday. Clarkson, 24, had no choice but to sign it.

His roommate, a 23-year-old Canadian man, had just moved in, but now also has to vacate.

Most Nova instructors live in apartments rented by Nova. Nova deducted 60,000 yen from each instructor’s monthly salary in advance, stating that it constituted the self-pay amount of the rent.

Clarkson and his roommate had together paid Nova 120,000 yen per month for their apartment, but the landlord told them the actual rent was 70,000 yen a month. They also learned that Nova had failed to pay the rent the past two months.

After Nova filed for court protection, one of the firm’s preservation administrators said at a press conference: “Instructors are not to blame. We’ll take responsibility, so I hope [the landlords] will wait [for rent payments].”

http://www.yomiuri.co.jp/dy/national/20071103TDY02307.htm