Let's Japan.org Debunking Eikaiwa and Ramblings in Japan

The Yomiuri shimbun and other news agencies are reporting that president of G.communication, Masaki Inayoshi, has failed to report ¥500 million (about $5.2 million USD) in income. The unreported income comes from him selling 230 shares in G.communication in 2007. Inayoshi reported the sales of some shares in 2006, which led the National Tax Agency to believe that his failure to report the income this time was intentional.

The story doesn't end there. The NTA audited 10 other G.communication group companies and found that they have failed to report some ¥1.5 billion ($15.8 million USD) over the past several years. Some of the companies were apparently in the red and could pay their taxes.

The Nikkei shimbun reports that the NTA says Inayoshi owes ¥100 million ($1 million USD) in back taxes and other charges.

The numbers in the Chunichi shimbun are a bit different. It reports that the NTA assessed 13 G.communication group companies ¥295 million in back taxes for failing to report income over the past 5 years. ¥170 million of this stems from G.food and its opening of several restaurants. The NTA also told G.education that it was not allowed to list ¥30 million in airfare to help foreign instructors return home as a loss. (　一方、同社とグループ会社の計１３社も昨年決算期までの５年間に申告漏れがあり、計２億９５００万円を追徴された。うち「小樽食堂」「ハイカラヤ」などを展開する「ジー・フード」社の追徴額が約１億７０００万円だった。「ジー・エデュケーション」は旧ＮＯＶＡを引き継いだ際、帰国できない外国人講師に支給した飛行機代約３０００万円を損金としたが、同国税局から損金に当たらない交際費だと指摘されたという。)

Other reports, like this one in the Iwate shimbun shed some more light on G.education's exaggerated accounting practices. You will recall that G.education took in refugee NOVA students and only charged them 25% the normal lesson fee as an incentive to continue studying. G.education booked the discount as a loss and apparently did the same when it signed up new students. (うち１社はＮＯＶＡの英会話教室事業を引き継いだ教育会社。ＮＯＶＡに受講料を支払ったまま授業が受けられなくなった元受講生への「救済策」として受講料 を割り引く優遇制度を適用。割引分は同社の「損金」として計上してきたが、優遇制度の対象とならない新規の受講生の受講料についても同様の会計処理をして おり、国税局は損金を過大に計上した可能性があるとみているもようだ。 )

Inayoshi, however, denies that he was intentionally hiding income.

That Inayoshi has found himself in trouble with the authorities is nothing new. Shortly after G.communication took over NOVA, The Japan Times reported this:

The aggressive [expansion] strategy has at times led to shady deals that have caught the attention of the government.

In October 2006, the Financial Services Agency ordered G.communication to pay a ¥390,000 fine for insider trading after purchasing shares of one of its subsidiaries that was planning a capital increase before the information became public.

This isn't the first time he's been caught. It's tough to say how this run-in with the taxman will affect G.communication, but it's certainly the kind of attention the company doesn't want. It is, however, is another example of how shoddy and shady management is par for the course in eikaiwa.

Yomiuri article

経営破綻(はたん)した英会話学校大手ＮＯＶＡの事業を引き継いだ「ジー・コミュニケーション」（名古屋市北区）グループの稲吉正樹代表（４０）が、自社株の売却益を申告しなかったとして、名古屋国税局から約５億円の所得隠しを指摘されていたことが２日、わかった。

また、グループ会社約１０社も同国税局の税務調査を受け、２００８年決算期までの数年間で総額約１５億円の申告漏れを指摘された。

関係者によると稲吉代表は０７年、ジー社株約２３０株を売却し、約５億円の利益を得たが申告しなかった。０６年に売却した際は申告していたことから、同国税局は「意図的に申告しなかった」と判断したとみられる。

グループの教育会社は、旧ＮＯＶＡへ支払った受講料の約２５％を追加した場合、受講を継続できる優遇策を設けていたが、この受講料の経理処理などについても、同国税局から是正を求められたとみられる。

信用調査会社によると、ジー社は１９９７年設立で、今年３月期の売上高は約２５億円。稲吉代表は「国税局から申告漏れを指摘されたが、意図的なものではなかった」とのコメントを出した。

In the forums, Inflames provides a link to a G.communication PDF. It seems that they have decided to rent out space at its Yaesu school. There's nothing unusual about this as businesses look for ways to generate revenue during the economic collapse. I've heard about parts manufacturers making confectioneries to help make ends meet. Still, it suggests that business isn't very good at the Yaesu school.

Let's back up a bit to March 2008:

YAESU NOVA

Well, not surprising, the opening of the YAESU school today was a complete bomb! They had a total of about 7 calls and hardly any visitors. There are plans to open new schools in Shibuya, Shinjuku and Ginza next. One has to wonder if they'll get the word out for those schools.

Now, fast forward to the present:

The reason for this is that Yaesu has now become a HALF DAY school. Its only open from 5-9, Monday-Friday. It used to be a regular school. I worked there for six months, up until the end of last year almost, but then got the forced transfer BS and was told to move - as have other instructors, due to the reduced operating hours.

It doesnt surprise me now that they have to rent out the rooms - probably just to cover the rent. My understanding is that now ALL of the instructors that teach there are newbies, who came after the collapse and received the Mickey Mouse, lecture-style training by Mr.Smiley and crew. Some received actual training, basically like OJT (especially last year, cuz we had training every couple weeks and I was doing Obs for pretty much the whole six months I was there). At the time I was there, however, and shortly thereafter, the instructors (myself included) pulled through the bankruptcy and had gone through Old Novas system of training (again, nothing amazing, but more comprehensive than what most have received following the collapse), and were used to the textbooks, the lessons, etc.. Even instructors that were relatively new (started with Neo-nova) were working with seasoned instructors and could receive tips/advice if they wanted it.

The flyer is straightforward: the Yaesu school has space for rent. Says the first ad:

1. 2 minutes from the Yaesu Exit
2. So close, you can catch your (bullet) train with seconds to spare
3. No other businesses next to the school. Nice and quiet
4. Close to izakayas, so you can head out for a drink after your meeting
5. Same-day reservations available

There are four rooms (1 ten-person and 3 six-person rooms) with videophone booths, white boards, and access to washroom. The 6-person room rents for ¥3000/hour while the larger room goes for ¥4500/hour.

The second ad is more of the same, but with an added touch of humor. This time, instead of a meeting room, G. com is renting out "private offices" which suspiciously resemble the meeting rooms, for the low price of ¥500/hour. Again, the 5 merits of their service:

1. 2 minutes from the Yaesu Exit
2. So close, you can catch your (bullet) train with seconds to spare
3. No other businesses next to the school. Nice and quiet
4. Large desks for efficient work
5. It's cheap

The hilarity is in the two text boxes in the bottom right corner.

The top one says, "All you can drink coffee" and the bottom one, "OK to ask foreigners questions after 5:00 P.M." How demoralizing. Instead of giving lessons, instructors will be expected to entertain users and their endless parade of hits such as, Do you know Ichiro? How long you Japan? and the timeless classic, Can you eat Japanese food? Why not just turn the school into a host/ess bar and be done with it?

I wonder if there's a catch here. ¥500 for the first hour and ¥400 for every subsequent hour is really cheap, and I don't see how that covers costs unless all of the offices are used. Will users have to sit through a sales pitch for lessons? Does G.Com hope that people will magically sign up after renting their rooms? Moreover, what's to stop someone from using this service as an eikaiwa? Would a businessman be able to snag an instructor and have him correct or edit some correspondence?

Like the parts manufacturers forced to make candy, G.Com's attempt at converting the school into a meeting space is delaying the inevitable. If you can't make a go of your primary business, it's time to think about closing the school or downsizing it, and accept the fact that it will never be very busy or profitable.

As a postscript to Sahashi's trial, I noticed this short blurb in the news:

「うさぎ」ＣＭも再開　「ＮＯＶＡ」再拡大目指す

ワンマン社長と呼ばれた猿橋望被告（５７）の手で国内最大手に成長したＮＯＶＡの経営破綻（はたん）から１年半。行き場を失った受講生の救済や外国人講師の雇用など、課題山積の事業を引き継いだジー・コミュニケーション（名古屋市）は、約半年で黒字化を達成。今年３月には、かつて人気を集めたマスコット「ＮＯＶＡうさぎ」のテレビＣＭも再開した。

経営破綻後には、サウナや茶室付きの「豪華すぎる」社長室が公開され、企業のイメージは大きく傷ついた。社長室の机に飾られていた「ＮＯＶＡうさぎ」のぬいぐるみが繰り返し報じられたこともあり、ＣＭは長く封印された。

事業が軌道に乗り「効率化で完全復活した」（ジー社）と宣言するに至った新生ＮＯＶＡ。もはや猿橋被告とは無関係の別会社だが、「分かりやすいブランド名や『駅前留学』などのフレーズは大事に継承したい」と、事業拡大に意欲をみせている。

In short, g.communication has turned a profit largely due to the popularity of the new TV commercial (as far as I know, there's only one) and the NOVA bunny. despite the mountain of problems left by the collapse of NOVA, g.communication turned the business around in six months and started advertising again in March with the ever popular NOVA usagi.

Apparently there still is some value left in the NOVA brand and ekimae ryuugaku.

The blog Tofugu has an interview with a current neo-NOVA employee. There's not a lot you haven't heard before, but it's still worth a read for its summary of the aftermath of NOVA's collapse and the perspective on what it's like working for NOVA now.

If you're thinking about working in Japan, the word on NOVA is simple: Don't bother working for them.

5. Would you recommend anyone coming to Japan to try and get a job at G. Education?

Honestly? At this point, no. Come to Japan and try to get a job, sure. But don’t try with G. Education… too much is up in the air at this point, the company hasn’t really figured out what the hell it’s doing and is still not turning a profit as of yet. We’re all still sort of holding our breath for the second grand finale, though that is by no means for sure what’s going to happen. The bottom line is that the future is uncertain, and the management is clueless. I shudder to imagine the mixups and lack of help someone brand-new to Japan would have, all on behalf of G. Education.

Best bet is to get a contract with one of the other big eikaiwas before setting foot in Japan, unless you’ve got a significant savings and don’t mind tightening your belt and not indulging in the tourist experience until your situation gets a bit stable. You can build a decent schedule that will support a comfortable lifestyle, including partying and touristy stuff, but it takes time and multiple small companies.

Amazingly, this teacher has fond memories of NOVA:

Old NOVA, while a typically evil corporation out to squeeze every bit of profit it could from its customers and its employees, was at least reasonably efficient and under control. When management told us something, we generally could feel it was reliable (up until the spiral into bankruptcy, anyways). It knew how to manage foreign employees and had a system set up that took care of all the little details that foreign instructors would have to deal with, moving to a foreign country. The new NOVA is lacking in reliability, know-how, awareness of the differences between foreign and Japanese management style / work expectations

So, old NOVA was evil, and the new NOVA is a mess, but as long as the paychecks keep coming in everything is OK. That's an awful justification. You have three choices when you work for an employer like this:

1. Fight for your rights and take them to court if necessary
2. Quit and find another job
3. Give up on your life in Japan and return home

Sadly, it seems this particular teacher has chosen a fourth option: do nothing. G.communication and schools like it will continue to limp along for a long time so long as they have a steady supply of compliant teachers suckers. Don't be a sucker if you want to teach in Japan.

RandyDickson in the forums has this observation about G.communication:

BEFORE:

Salary -G.education Nova offers a very competitive salary. New instructors on a full time schedule can expect to earn as much as ¥299,000 a month while a part-time instructor's salary can be as high as ¥205,000. Your salary will depend on your schedule and where you are located, but your salary won't fluctuate depending on the number of students you teach in a month; you can count on it every month.

If you wish, you can supplement your monthly income by teaching extra lessons. In addition to this, performance-based salary increments are possible every year.

NOW

The monthly salary is up to 273,000 yen for a five day week of eight 40 minute lessons per day. Other schedules with fewer work days and/or fewer lessons per week/day are also available, so it is often possible to accommodate specific scheduling needs. Lesson periods that no students reserve into are still paid, so your salary won't fluctuate depending on the number of students scheduled each month

Notice that the salary they offer is no longer "competitive".

It's noticeably lower.

No mention of OT now.

No mention of performance-based salary increments each year. Limbo anyone?

Translation: Long hours for low pay. G.communication isn't trying anymore. Who do they expect to attract with conditions like these? And what happened to Inayoshi's ad campaign on TV? Is this as good as it gets?

Not that you need more reminders about the fall of Nova and the chaos over the past year, but Jordan Pearson offers an excellent account of the collapse.

It would have sucked to be Jason Cornish:

Nova’s business model operated on paying for each month with the amount of new lesson packages sold in the preceding month. When demand for English lessons began to decline, its survival became precarious. When the Japanese Ministry of Education, Trade and Industry (METI) slapped a six-month ban on selling new long term contracts as punishment for its cancellation criminalities, the company was finished, and everyone in the Nova hierarchy, with the exception of the delusional President, knew it was just a matter of time until it went bankrupt.

Despite this knowledge however, not only did Nova continue to sign-up new students on short-term contracts and string instructors along with bullshit faxes and misinformation, they actively recruited new instructors from overseas, knowing full well that they would soon be stranded in Japan with no income!

Jason Cornish from Seattle was one these unfortunate chumps. He interviewed for Nova in September, and being sober at the time, easily got the job. The first thing he saw when he arrived at his final destination, Kokura station, was Kurosaki branch AT, Joi Wong, sitting on the shinkansen platform in shorts and a t-shirt holding a crudely-drawn sign on A4 paper baring Jason’s name.

As Jason remembers, “This guy comes up to me and says, ‘You Jason? Nice to meet you. Sorry about my casual appearance, but the bastards you’re about to work for were supposed to pay me two weeks ago and haven’t, so I’m on strike today.’ This was the very first thing I heard when I arrived in the city!”

But, as Jordan notes, deciding to cling to the corpse of the dead bunny or join G.communication was an unappealing choice.

The televised conference about the corporate takeover in November 2007 was a classic example. We were told we were supposed to turn-up in suits, and I was like, “Fuck that! Pay me and you can tell me what to wear!”, but sure enough, everyone else, except one other guy, dutifully turned-up suited and booted.

My “fuck-you-I-won’t-do-what-you-tell-me” attitude turned-out to be a stupid move, however. We really would have been smartest going with the herd – from a financial perspective anyway (which is obviously what it was all about). At the meeting regarding the buy-out (though the “buy-out” can be more accurately described as vultures picking over a carcass) we were given the option to either sign-up to the new company, G.communications Ltd., or stay with the bankruptcy-protected Nova until it officially went bankrupt some time in the future (potentially years). As Nova’s useless trustees, charged with finding a corporate sponsor, had promised us they would find a company who guaranteed instructors’ back-salaries and would at least partially refund lost student contracts, revealed at said meeting that our savior, G.com (who currently run Nova) were going to do neither, I refused to sign their broke forms at all.

I ended-up doing myself out of ¥150,000 though by not signing up to the new company (which was everyone else did). Some took Option B which was to go on stand-by and take 60 percent salary until they were offered a position some time in the future, as opposed to Option A: start work immediately; these people were given ¥150,000 to tide them over. This money was essentially a parting-gift however, as G.com surely expected most of the instructors to take this money and bounce. My clinging on to the carcass meant I was still technically a Nova employee, on 60% pay, until official bankruptcy was declared, even when I went home to New Zealand for a few months, and this was included in my back salary from the government. Eventually, most of the Option B peeps that stayed, having been categorically promised future employment with G.com, were done away with in a few months anyway, the new company citing less than anticipated customer interest as the reason.

Read the rest...

According to the Yano Research Institute, the effects of the collapse are still being felt. Their latest survey on the foreign language market shows it to be still on the skids, attributing the 8.4% year-on-year decline [PDF] to the "Nova shock." That shock has manifested itself in a marked shift from studying at schools to e-learning (studying via computer or mobile devices) and to corporate-oriented education services. E-learning increased 7.8% and corporate education services grew 3.4%. The survey notes that the decline in the language market may have bottomed out, provided that the businesses get their act together and regain the confidence of their customers.

With the financial crisis in the United States forcing Japanese manufacturers to cut employment and production, I'm not sure I share the tentaive optimism of the survey. There is still a lot of toxic debt that has to be dealt with and the full force of the crisis and the recession has yet to wash up on Japan's shores. There is still a lot of anger and mistrust over the way Nova decieved its customer and over the government's involvement and handling of the matter, and the receission may shrink the market yet further, killing off smaller and waker schools. It seems that GEOS is aware of this and has been taking steps to control costs so as to weather the coming storm. Maybe I'm too pessimistic. Is eikaiwa and language learning more recession-proof than other businesses? Has the recession affected you or do you expect things to chug along as usual?

Things are apparently looking good at G.communication. Its president, Masaki Inayoshi, sat down with the Chunichi Shimbun to talk about the past year.

Inayoshi says that the past year has gone well for the new Nova. Of the approximately 670 schools left in the wake of Nova's collapse, G.communication has re-opened 126 of them. Combined with the new schools and jukus opened by G.communication, they were operating 396 schools as of the end of October. These schools apparently have a combined capacity for 300,000 students, but the current student body is only 76,000, 80% of which are from the old Nova.

As for the problem of employing some 1500 of its instructors, the issue has largely been resolved with after reaching an understanding with the labour union in June. Inayoshi says that the instructors who wanted to stay on with Nova are all employed. Nova currently has 656 instructors, of which 500 are from the old Nova. He also says that the problems over the past year have been dealt with and the company is back in the black.

When asked about old Nova's faults, Inayoshi says that there was a lot of waste. There were too many schools, and alot of them were overly large and subject to high rents. He moved about 80% of those schools to smaller and cheaper locations nearby. He is also critical of the way Nova used to charge for lessons up front and has done away with that practice opting for a monthly payment system instead. He calls the system of spending lots of money on advertising and collecting lessons fees up front a "warped business model."

Inayoshi also notes that he's been able to attract Nova refugee students to the new Nova by offering them lessons at 75% discounts. He says that even when students have used up their remaining lesson points, about 70% decide to renew their contracts. To him, this is a sign that they're satisfied with the lessons.

As for his next move, Inayoshi says that he wants to set up an ocha no ma ryuugaku center in the United States next year. While the current center is in Osaka, he says that it will be more efficient to employ instructors in the States. Also, look for new Nova TV commercials in the new year in which the Nova bunny will make its return.

Comment: So Nova is profitable again, huh? I suppose when you drastically shrink the company and cut costs, that's what happens. One thing that stands out are the numbers: 80% of its students and 76% of its instructors are refugees from the collapse. Neo-Nova is a rump of its former self. It may be profitable, but how large can it be expected it to grow with numbers like these? It doesn't sound like it's attracting a lot of people. The return of the bunny will also be interesting to watch. Apparently G.communication will try and squeeze every last yen out of its corpse despite its connection to the tragedy of last year.

Original article

「ＮＯＶＡウサギ復活」　１年で黒字化達成、ジー社会長に聞く

2008年11月18日 朝刊

経営破たんした英会話学校ＮＯＶＡの事業を引き継いでから１１月で１年を迎えたジー・コミュニケーション（名古屋市）の稲吉正樹会長（３９）は、 中日新聞のインタビューに応じ、米国に「お茶の間留学」の講師を集めるセンターを新設し、テレビＣＭを年明けに再開するなど、積極的な営業展開に転じる考 えを示した。主なやりとりは次の通り。　（矢野修平）

－ＮＯＶＡ再建は進んでいるか

再建のペースは予想以上に速い。教室は（約６７０あった教室のうち）１２６校を引き継いだ。新規開校や学習塾への併設などを合わせると、１０月末 で３９６校になっている。（最大３０万人とされる）受講生は現在７万７６００人。約８割が旧ＮＯＶＡから継続して受講している。

－約１５００人いた外国人講師については、再雇用をめぐるトラブルがあり、６月に労働組合側と和解を結んだが

大きな問題はなかった。（再就職希望の）講師は、ほぼ全員引き継いだと思っている。現在の外国人講師数は６５６人で、うち約５００人が旧ＮＯＶＡからの講師だ。旧ＮＯＶＡが抱えていた問題点は、この１年でほぼ解決した。黒字化も達成し、大きな課題はない。

－旧ＮＯＶＡの問題点とは

教室は無駄が多かった。どこも必要以上に広くて家賃が高く、約８割を近隣に移転させた。また、受講前に多額の授業料を前払いさせる料金体系も改 め、月謝制を基本にした。多額の宣伝費をかけて生徒を集め、多額の前払い金を次の宣伝費に充てる。いびつなビジネスモデルだった。

－再建の手応えは

旧ＮＯＶＡの受講生が、未消化授業分を通常の２５％の料金で受けられる優遇策を適用している。それが終わっても約７割が継続している。授業内容に満足してくれているからだろう。まったく違う会社になっており、丸１年を機に攻めに転じたい。

－どう展開するか

テレビ電話を使った「お茶の間留学」の講師を集めるセンターを、米国に年明け以降、設立したい。現在は大阪にあるが、講師の採用面から現地の方が効率が良い。また、テレビＣＭも年明けから開始する。キャラクターのＮＯＶＡウサギを登場させ、新ＮＯＶＡをアピールする。

The luxury “office” that former Nova president Nozomu Sahashi claimed was actually a showroom is no more.

The General Union has posted details of an agreement between G.communication/G.education on their website. As you are aware, ever since NOVA went bankrupt, the General Union has been busy trying to get G.communication to rehire all of the instructors that were fired when G.com took over. It appears that they have succeeded.

The Nikkei published an interesting article last week [free registration required] on the legal battle leading up to the Supreme Court decision that helped push NOVA into oblivion. I had no idea that one man took on NOVA and changed things.