Ministry Slaps Down Nova

[Captain Japan]

Did Sahashi ever resurface from his disappearance last week?
Shady stock speculator claims link to NOVA's failed rescue plan
Mainichi

A stock speculator arrested for alleged market manipulation has claimed to have had links with two tax haven-based funds ousted NOVA Corp. President Nozomu Sahashi had been trying to get to prop up the failed English conversation school chain, the Mainichi has learned.

Haruo Nishida, 57, the speculator arrested by the Osaka District Public Prosecutors Office earlier this month for stock manipulation, claims to have been involved in the setting up of the two funds based in the British Virgin Islands.

Sahashi, however, vehemently denied the claims.

"I've never heard of Nishida, nor have I met him," Sahashi told the Mainichi before he was axed by his board last Thursday. "A lawyer was dealing with the funds and I've heard the lawyer has had nothing to do with him, either."...more...

[Catoneinutica]

Did Sahashi ever resurface from his disappearance last week?
Shady stock speculator claims link to NOVA's failed rescue plan
Mainichi

I've heard rumors of Sahashi mob connections for as long as I've lived in Japan. A "disappearance" a la Jimmy Hoffa would be an entirely appropriate outcome for the bubble-era relic.

[FG Lurker]

I don't understand the idea behind feeling sorry for people who have found themselves with "only 3000 yen in the bank" or in similar circumstances.

You are expecting too much.

A huge percentage of people live this way in their native countries -- paycheck to paycheck. Moving to another country isn't going to break bad fiscal habits, unfortunately.

[ttjereth]

You are expecting too much.

A huge percentage of people live this way in their native countries -- paycheck to paycheck. Moving to another country isn't going to break bad fiscal habits, unfortunately.

I know a lot people I know back home (in the states), my family included, live this way, but I would think the enormity of living in a foreign country would scare you into wanting some insurance, especially in light of the fact that you probably won't be getting any help from the country itself (in Japan anyway).

I remember when I first moved to Japan, from my first few paychecks I put all but the barest minimum amount of money required to live into bank accounts "just in case" in order to make sure I had some sort of safety net.

Maybe it comes from having grown up poor, but really the idea of being caught with no money in a foreign country just scared the hell out of me, so I can't really understand, or feel sorry for, the legions of Nova who I see crying their financial woes.

Granted, the loss of the job is not their fault, but jesus, there's optimism and then there's just plain stupidity.


I dunno, maybe I'm just in an unforgiving mood today.

[Catoneinutica]

I know most people I know back home (in the states), my family included, live this way, but I would think the enormity of living in a foreign country would scare you into wanting some insurance, especially in light of the fact that you probably won't be getting any help from the country itself (in Japan anyway).

I remember when I first moved to Japan, from my first few paychecks I put all but the barest minimum amount of money required to live into bank accounts "just in case" in order to make sure I had some sort of safety net.

Maybe it comes from having grown up poor, but really the idea of being caught with no money in a foreign country just scared the hell out of me, so I can't really understand, or feel sorry for, the legions of Nova who I see crying their financial woes.

Granted, the loss of the job is not their fault, but jesus, there's optimism and then there's just plain stupidity.


I dunno, maybe I'm just in an unforgiving mood today.

What's the bank balance of the average American worker? Something like $600? Having grown up poor myself, it's simply an immutable law of financial physics that you get six months income's worth of liquid assets (no, I don't mean the movie starring TV's Corbin Bernson and Shelly Long ) stashed away as quickly as you can, even if it means forgoing buying some Chinese-made crap in the meantime.

[FG Lurker]

I agree with you that people should have a safety net in place -- regardless of where they live. Enough cash on hand to live for 6 months is wise. Anything beyond the 6 month emergency fund can (and should) be invested. I know very few people who actually have this though, either in Canada or in Japan.

I think the average 23yo guy living in Japan is thinking more about where he's going to pick up his next bed partner than about what is going to happen if NOVA goes bankrupt. I was not so different at 23..

[Edit: Bit slow on my post so Catoneinutica has already made the same point.]

[ttjereth]

What's the bank balance of the average American worker? Something like $600? Having grown up poor myself, it's simply an immutable law of financial physics that you get six months income's worth of liquid assets (no, I don't mean the movie starring TV's Corbin Bernson and Shelly Long ) stashed away as quickly as you can, even if it means forgoing buying some Chinese-made crap in the meantime.

I know my american bank balance is like $300, but that's beside the point (since I live in Japan).

But I'd say we pretty much agree here. I understand the whole "live now, worry later" mentality and everything, and the desire to have fun, but nothing but 3000 yen in the bank? Even $600 is way better than that

[FG Lurker]

but nothing but 3000 yen in the bank? Even $600 is way better than that

Sure, but only because you can stay drunk longer on $600 than on 3,000yen. Neither amount will pay for a ticket home or even a month of living expenses.

[ttjereth]

I agree with you that people should have a safety net in place -- regardless of where they live. Enough cash on hand to live for 6 months is wise. Anything beyond the 6 month emergency fund can (and should) be invested. I know very few people who actually have this though, either in Canada or in Japan.

I think the average 23yo guy living in Japan is thinking more about where he's going to pick up his next bed partner than about what is going to happen if NOVA goes bankrupt. ]

I was 21 or 22 when I first moved to Japan and packed away about 6 months living expenses in savings.

As I said before, I'm no financial genius or anything, but it's simple self-preservation.

Hence, no sympathy for these guys unless they were victims of some sort of disaster (e.g. death in the immediate family, house burnt down) which landed them in this position.

[ttjereth]

Sure, but only because you can stay drunk longer on $600 than on 3,000yen. Neither amount will pay for a ticket home or even a month of living expenses.

True enough

Although it wasn't that long ago when I was still able to get round trip tickets home for $600... sigh

[sublight]

What's the bank balance of the average American worker? Something like $600?

It would probably be a more accurate comparison to ask the bank balance of the average American college grad, since you need a college degree to get the jinbunchishiki-kokusaigyomu visa that most teachers have (unless Nova was hiring a bunch of Wahoris right out of high school). I'd expect them to be a bit smarter, on average, about managing their money, but obviously that's not always the case.

I think my first six months or so here (back when I was 23), I spent pretty much everything on alcohol before I finally got smart with my money. I was still broke at the end of every month, but that was because I sent about 2/3 of my paycheck home to invest as soon as I got it. Learned pretty quickly to get around everywhere by bicycle and develop a taste for meals of rice and kimchee, with some instant curry when I was feeling extravagant.

[FG Lurker]

I'd expect them to be a bit smarter, on average, about managing their money, but obviously that's not always the case.

Last I checked most college/university courses teach nothing at all about money management...

As far as I am concerned money management and investing should be required subjects from a very early age, at least from middle school. In the end, what is more important to a person's life: Knowledge of Ancient Egypt or understanding basic economic principles and having good money management skills? Ancient Egypt is interesting and all but it's not going to pay the bills each month.

[Iraira]

Last I checked most college/university courses teach nothing at all about money management...

As far as I am concerned money management and investing should be required subjects from a very early age, at least from middle school. In the end, what is more important to a person's life: Knowledge of Ancient Egypt or understanding basic economic principles and having good money management skills? Ancient Egypt is interesting and all but it's not going to pay the bills each month.

That's not true. King Tut never had financial problems, and he always tipped the pizza delivery guys well. Ramses was kinda tight, but they named a condom after him, which is my life's dream.

[GuyJean]

.. Ancient Egypt is interesting and all but it's not going to pay the bills each month.

I once knew a stripper that dressed like Cleopatra... Put her through college. ]http://www.themint.org/about/why-the-mint.html[/url]

Not sure about this NOVA thing.. I thought most teachers used NOVA as a passport to Japan anyway; now they have the visa and don't have to go to work. BFD.. If they were serious about teaching, they could find other work somehow.

If Geos was smart, they'd offer to honor a month of NOVA classes students already paid for if they sign up for a year course with Geos..

GJ

[Catoneinutica]

That's not true. King Tut never had financial problems, and he always tipped the pizza delivery guys well. Ramses was kinda tight, but they named a condom after him, which is my life's dream.

Ramses might have been ribbed...for her pleasure, but King Tut ate a crocodile. Plus, he gave his life for tourism.

http://www.youtube.com/watch?v=LvmiJQSl5hM

[Mulboyne]

I am starting to think Nova was just as much in the banking business as the eikaiwa business.

Interesting you say that. Some of the calls for the government to intervene resemble the arguments in favour of protecting the depositors of a failed bank. We are only at the stage of court protection rather than full bankruptcy so it is difficult to get a sense of what assets are left in the company. However, what tangible assets are they likely to have? It seems NOVA didn't own much property, didn't have much of a publishing arm and was quite stingy about buying PCs and other equipment. The tax office always strives to be paid in full before all other creditors so you have to imagine that there won't be much, if anything, left in the kitty to provide refunds to customers.

The government doesn't really want to get involved here but they do have a few incentives to work with. NOVA was getting government subsidies before the scandal and these could be offered to a suitor who was prepared to pick up NOVA liabilities. If the NOVA company can be shown to have registered a loss before winding up then this could create a tax credit for a potential buyer if the government can convince the tax man of that.

A common complaint from people who want to continue to study English is that they have no way of telling which schools are any good. One measure some Japanese commentators have called for is a kind of rating system which reflects how successful students are at learning the language. The aim being to provide guidance to potential customers and an incentive to schools to tangibly improve their students' language skills. The problem here might be that the government would be wary of introducing performance tables for any educational establishment because there might be calls to extend the system to juku and the like.

If Geos was smart, they'd offer to honor a month of NOVA classes students already paid for if they sign up for a year course with Geos

That is similar to what has happened when schools have failed in the past. The trouble here is that NOVA was so large that the other schools may well not have the capacity to deal with a sudden influx. Eikaiwa in general have a reputation problem because of NOVA's collapse so they will certainly all be trying something to keep in people's good books.

I agree with other people here that someone teaching at NOVA for a year or so after college as a way of embarking on a paid sex and booze tour can't really be expected to have set aside much money for emergencies. Their rainy day fund would probably be called "parents". Some of them probably feel shell-shocked right now but if they let something this ruin their life then they will have a tough time making their way anywhere in the world.

With 4,000 teachers on the books, though, it is statistically likely that a fair number were in the process of renewing their visas or are coming up to it. Some might just take it as a message from the gods of fate to leave the country but you would hope that immigration wouldn't seek to deport someone who couldn't immediately find another sponsor but wanted to stay in Japan.

The people I think should take advantage of the situation are NOVA long-timers. Perhaps the fact that they are long-timers means that they haven't seized the initiative much before in their lives but a rude awakening like this ought break anyone out of a rut. They must have some decent experience of teaching and should try setting up themselves - preferably in a group - to grab some of the market now.

[unkosando]

NOVA's students might not get their money back but there must be a reasonable number among them who will still want to learn English. If I was an unemployed NOVA teacher, I would think this would be one of my best chances to set up in business on my own. If you have no money at all in the bank then this isn't an option but I would consider approaching some disaffected students and offering to teach them for free in this period.

I always thought the move for English teachers at NOVA was to ask your students to quit and then take private lessons from you on the side for less than they are currently paying. At least that's what the Nova teachers I knew were doing. So I am assuming that these teachers probably still have some source of income.

[omae mona]

Interesting you say that. Some of the calls for the government to intervene resemble the arguments in favour of protecting the depositors of a failed bank. We are only at the stage of court protection rather than full bankruptcy so it is difficult to get a sense of what assets are left in the company. However, what tangible assets are they likely to have? It seems NOVA didn't own much property, didn't have much of a publishing arm and was quite stingy about buying PCs and other equipment.

I'm anything but a financial analyst. But I do have a calculator. I was thinking that the vast majority of their operating costs must be rent for their branches and salaries for teachers. I guess 4500 teachers at 300,000 yen per month, and 900 schools at 2,000,000 yen per month (just my guess on rent). With this figure, the pre-paid tuition of 40 billion yen should have been, in and of itself, enough to pay about 12 months of expenses. Where the heck did that money go? Paying off creditors? Maybe Nova was just a big ponzi scheme.

[Mulboyne]

Yomiuri: 'Egotistic' Sahashi's interference prompted Nova coup d'etat

English conversation school chain operator Nova Corp. has filed for court protection from creditors after running into financial trouble under its president, Nozomu Sahashi, who has since been sacked by the company's other board members. This is the first installment of a three-part series of articles taking an in-depth look at Nova's collapse. The three Nova Corp. directors had been waiting more than an hour for the company's founder, Nozomu Sahashi, to show up for an extraordinary board meeting scheduled to begin at 9 p.m. at the firm's Tokyo office Thursday, when Sahashi called one of their cell phones. "I'm somewhere else now, I want to hold the board meeting here," Sahashi said. Shoichi Watanabe, Hitomi Yoshizato and Anders Lundqvist refused to comply with Sahashi's request, and began the meeting on the 23rd floor of the Shinjuku NS Building in Shinjuku, Tokyo, without him. Within about 10 minutes, the three board members had agreed to dismiss Sahashi as president and to file for court protection from creditors under the Corporate Rehabilitation Law.

The three had reasons for ignoring Sahashi's request this time. Two days earlier, Sahashi had chosen a Tokyo hotel lobby as the venue for an extraordinary board meeting. At the meeting, Sahashi repeatedly told the directors, who were pressing him to make a decision regarding his resignation and on filing for legal liquidation of the company, that he could raise 3 billion yen by Thursday. As the other executives had to speak quietly to avoid attracting people's attention, Sahashi insisted he wanted to put off a final decision until Thursday evening. The directors are said to have felt if they had complied with Sahashi's summons on the Thursday evening, they would once again be left following his lead. This distrust was behind their "coup d'etat." The board members were close associates of Sahashi's, and had gone through a great deal with him over the years. Lundqvist has been a partner of Sahashi's since Nova was founded in 1981, and Yoshizato went to work with him as a part-time worker at the same time. But despite their long history, the three board members are said to have rebelled because of what they saw as the egotistical actions of Sahashi and their feeling that the company had become a one-man show.

In a meeting held in late May in Tokyo, Nova's management was in the final stages of discussions over a capital and business tie-up with leading retailer Marui Co. In return for Marui giving Nova a 6.6 billion yen capital injection, Nova would have given Marui exclusive rights to issue all loans taken out by its students. The deal would have included conditions favorable to allowing the four board members, including Sahashi, to stay in their posts. But moments before an agreement was reached, Sahashi, 56, without giving a reason, asked for a little more time to consider the deal and walked out of the meeting. He could not be found for the next three days. Sahashi's actions appalled Marui, which pulled the plug on discussions. The former president's interference reportedly put an end to several more plans for tie-ups prepared by the board members, creating a widening gulf between Sahashi and the board.

However, it was the firm's area managers--executives in charge of groups of schools in each region--that sparked the board members' uprising. The area managers handed a written petition to Sahashi in person on Aug. 17 demanding his resignation, and calling for the company to ensure Japanese staff and foreign instructors were paid on time. The petition contained phrases such as, "We want Sahashi to step down to restore our corporate image." The signatories also stated they would resign on Aug. 31 if Sahashi did not comply with their demands. But even then, Sahashi is said to have offered little but excuses, making statements such as, "I'll have some good news for you in September," and "The company won't go under if we honor our debts." The regional managers petitioned for Sahashi's resignation on five occasions, convinced the firm could not be rebuilt with him at the helm. The board members and other executives contacted lawyers, the Economy, Trade and Industry Ministry and Sumitomo Mitsui Banking Corp., Nova's main bank, at the beginning of October to begin plans to oust Sahashi and to file for court protection. Sahashi, an individualist who drove Nova to the top of the English conversation school market, is still in hiding. "Ultimately, that man only ever thought of himself," one of Sahashi's aides commented.

[sublight]

Ex-NOVA president, family sold off majority of stake in failed school

OSAKA -- Former NOVA Corp. President Nozomu Sahashi and his family's stake in the failed language school operator declined from over 70 percent to less than 20 percent over a two-week period in September without a legally required report, it emerged on Monday.

Receivers for NOVA are considering filing a criminal complaint with law enforcers against Sahashi if it is proven that he sold the shares without filing a report with authorities.

Didn't Steve Miller write a song about this?

[amdg]

Ex-NOVA president, family sold off majority of stake in failed school

Didn't Steve Miller write a song about this?

Take the Money and Run?

[FG Lurker]

Looks like NOVA's total debt is (unsurprisingly) much higher than originally estimated. The current WAG is around 70bil:

http://www.asahi.com/business/update/1029/OSK200710290065.html

I expect to see it climb higher yet. 100bil yen perhaps?

[FG Lurker]

Ex-NOVA president, family sold off majority of stake in failed school

Didn't Steve Miller write a song about this?

Kenny Rogers too... "know when to walk away, know when to run......"

[sublight]

Take the Money and Run?

Bingo!

[Mulboyne]

An article with an agenda:

CSM: School's closure in Japan exposes tough times for foreign teachers

...Nova's demise is also illuminating Japan's worsening reputation for its dealings with thousands of skilled Western workers who, despite speaking Japanese and raising Japanese children, are denied voting rights, tenure at universities, promotions, and contracts beyond one-year agreements with few benefits.

An Industry Ministry survey in 2002 listed 15,800 foreign teachers and about 1 million students at private language schools such as Nova. Thousands more teach privately via networking sites such as findateacher.com, and at most public schools, with 3,800 in Tokyo alone.

"We're being treated like cheap migrant labor down in the southern United States," says Paul Baca, a young Canadian. One of thousands of "perma-temps," he has been going from job to job over the past decade. "About 99 percent of us have university degrees.... [W]e're not treated like skilled workers in other countries."

Ryan Hills quit his $18-an-hour insurance job in Indiana to fly to Tokyo in June in hopes of earning \260,000 (about $2,300) a month at Nova. "My flight landed, and the next day I heard about Nova on the news," says Mr. Hills. "I wanted to study Japanese language and culture but I've been too busy battling landlords and management at work."

He and his roommates from England and New Zealand were evicted after Nova didn't pay rent already deducted from their salaries. With only \9,000 left, he's hoping to receive an emergency loan offered by the US Embassy. "Ramen noodles are not that filling after a few days. The last job I applied for had 900 applicants. But I don't want to leave Japan. I cut off everything at home, for nothing."

Arriving a month ago after graduating from the University of Idaho, Derek Archer calls himself "one of the poor saps who got here when all this was happening. The trainers said, 'Don't worry.' But then our area manager said, 'You have six days to get out of your apartment.' I was totally lost." His student, an elderly woman, offered to put him up for two months. "I'm [fortunate].... Others are scraping for food money."

TV news sob stories of impoverished blond-haired, blue-eyed refugees was not the intention of Japan's kokusaika, or internationalization. During the bubble economy of the late 1980s, thousands of Westerners earned $3,000 a month to chat with Japanese at national schools such as ECC, Geos, and Nova. But wages have stagnated or declined. Some schools have closed. Teachers say Nova grew too big, with nearly half the market. "This is a crisis created by a company operating in very improper ways," says Bob Tench, who taught with Nova for 13 years.

Nova teachers joined the National Union of General Workers in the 1990s. Union representative Catherine Campbell says firms abuse the yearly-contract system. "Teaching in Japan ... [is] a really hard situation if you are serious about a long-term job." Ms. Campbell says Japan's Industry Ministry didn't monitor Nova early on, and then overreacted by banning long-term deals with students. "After that, Nova just started bleeding customers."

About 2,000 Japanese staff have not been paid since July, while many students are threatening legal action to get refunds. But Osaka District Court on Friday granted Nova court protection amid reports that Nova owes \43.9 billion. The Jasdaq Securities Exchange suspended trading in Nova stock. Calls to Nova's offices went unanswered.

Mr. Tench says teachers should be treated as professionals rather than tourists who speak a language. Some teachers say they fear a new trend of schools hiring cheaper college grads from the Philippines. Still, many teachers vow to stay on. Sam Gordon, who came to Japan five years ago, says he became attached to his students. "I don`t want to go back to America, I have no job there. Now foreign teachers have a bad image in Japan. I feel bad for the students, too. They didn't even get to say goodbye to their teachers."

[omae mona]

The first thing that struck me when I read that article earlier today was, "wow, they actually found a guy to interview named Paul Baca."

[Iraira]

The first thing that struck me when I read that article earlier today was, "wow, they actually found a guy to interview named Paul Baca."

It's a common Hispanic last name. I think there a "Baca" who was the LA Police Chief or Head Sherrif, or something.

[omae mona]

It's a common Hispanic last name. I think there a "Baca" who was the LA Police Chief or Head Sherrif, or something.

Yes, but the LA Police Chief (or whoever) wasn't living in Japan and drifting from temp job to temp job for 10 years. That's why I thought the name was amusing.

[Iraira]

Yes, but the LA Police Chief (or whoever) wasn't living in Japan and drifting from temp job to temp job for 10 years. That's why I thought the name was amusing.

He might be one and the same, I recall that Baca was underfire a lot of the time, so the job as LA PD boss may have initially been seen as ample training for teaching Engrish/temp life in J-pan.

[Mulboyne]

Second part of the Yomiuri feature:

Language school chain built on lavish ads, cheap labor

...Comparisons have been drawn between the business practices used by Nova Corp. and the scandal-hit nursing care provider Comsn Inc., as well as the manner in which both firms fell from grace. On June 13, the Economy, Trade and Industry Ministry suspended Nova for six months from signing up students on new contracts of one year or longer over misdemeanors that included lying to prospective students by telling them that they could book lessons any time they wanted. On the same day, Goodwill Group Inc., the parent company of Comsn, announced the care provider would withdraw from the business after the Health, Labor and Welfare Ministry had earlier barred the issuance of care facility licenses to the firm due to fraudulent applications it had made to acquire such licenses and other discrepancies. Ousted Nova founder Nozumu Sahashi reportedly objected to Nova being compared to Comsn on TV news programs. However, the paths taken by both companies seem to overlap in an oddly striking manner.

Both were run by extremely autocratic leaders who assigned employees excessive quotas to fill, and built up a network of either facilities or schools by investing large sums of money in advertising and publicity. Nova's rapid growth was supported by its colorful TV commercials, which gave birth to popular characters such as the Nova Rabbit, as well its inexpensive lesson fees. During fiscal 2005, a year in which the company sharply increased new schools, it racked up 11 billion yen in publicity expenses--about one-sixth of its turnover in that period.

One trick Nova used to inflate its earnings was to treat a portion of students' prepaid lesson fees as "enrollment fees." "I paid 320,000 yen in fees for additional lessons, but my contract said that 30,000 yen was for enrollment fees and 290,000 yen for lessons," a student who renewed a contract in March 2005 said. "Every time I asked about this, I wasn't given a satisfactory explanation." Accounting rules say enrollment fees can be posted as sale proceeds that can be used as operating capital. Thus, 30,000 yen was marked off as operating capital. The low lesson prices also made Nova stand out from its competitors. The cost per lesson at other leading chains ranges from 2,300 yen to 5,000 yen, compared with about 1,800 yen a lesson for students who signed up for the longest contracts with Nova.

Rival chains wondered how Nova could keep prices so low and still stay in business. What made this possible was Nova's doing everything in its power to cut labor costs. About 80 percent of the nearly 1,000 new Japanese employees taken on each year were female. Despite having to meet each school's strict contract quota and often having to work until late at night, the monthly take-home pay for a person in their fifth year at the company would be only about 180,000 yen. "It's our basic policy to have people quit while their wages are low," a former executive and close associate of Sahashi said. "It's better to have young women soliciting prospective students."

With the average length of time an employee spends at the company being three years and seven months, Nova would have a fresh intake of new employees four times a year. A Nova advertising sign states that "All instructors are native speakers." The 5,000 foreign instructors working at more than 900 schools also have been hit hard by recent events. "I just got married, and things would be really hard now without my wife's income," said Bob Tench, a 49-year-old British teacher who has been with the company for 13 years.

Since September, when wages started to be paid late, many instructors have faced financial hardships and are being forced to return to their home countries. Australian Foreign Minister Alexander Downer, seeing the plight of many Australian teachers who work for Nova, announced state support for them on the radio on Oct. 12. Both the Australian and British embassies in Tokyo have been displaying information on legal and employment consultations on their Web sites since Saturday. With this leading firm found to have violated the law and collapsed all too easily, the image of Japan's English-language schools overseas has been dealt a severe blow.