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。

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.

The anniversary of NOVA's collapse has quietly come and gone. The Daily Yomiuri and Sankei Shimbun provide an update on what has been going on over the past year. Their stories are unsurprising, as many issues facing former students and instructors have yet to be resolved.

The Daily Yomiuri points out that the government hasn't taken any steps to regulate language schools:

OSAKA--Even though it has been a year since Nova applied for court protection under the Corporate Rehabilitation Law, the central government has done little to ensure the private language school industry improves its operations.

The failure of Nova, which was the largest language school in the nation, has sowed public distrust in the industry.

Moreover, many former Nova students have not been compensated for tuition fees paid in advance, even though the school's operations have been taken over by Nagoya-based G.communication Co.

On Thursday, a group set up by former Nova students submitted a petition to Seiko Noda, state minister in charge of consumer affairs, requesting stronger measures to protect language school students.

"I'd like the authorities to investigate [the matter] in depth so similar problems don't happen," a 35-year-old female former Nova student said.

Although there are no regulations on the establishment of language schools, the law that covers such businesses was revised in 1999 to regulate them to some extent, allowing students to cancel contracts with the schools, for example.

Although Nova had many contract issues before it failed, the Economy, Trade and Industry Ministry supervising the law was slow to take punitive measures against Nova, such as banning it from entering into contracts with new students.

The ministry's failure to act in time was due, in part, to the matter being covered by multiple central governmental ministries and agencies.

The ministry is urging the industry to create voluntary rules, such as setting a tuition ceiling in contracts.

Urge the industry to create voluntary rules? WTF? This is self-regulation and is nothing more than passing the buck. What a joke. Draw up some regulations and put your foot down and enforce them.

The Yomiuri also notes that the students have yet to be compensated. Will they ever be?

Many of the about 300,000 students who had contracts with Nova when it failed have not been compensated, and former Nova managers have said payments made in advance are not likely to be refunded.

G.communication Co. offers classes to students--at 379 locations as of Friday--for 25 percent of the advance tuitions paid to Nova. However, only 70,000 of the students have signed up for the classes.

Although many students complain that there are no classes within easy distance, G.communication has been working to expand the number of its locations, but has not said how many.

Also, 55 firms operating language education schools, mostly belonging to two industry organizations, announced they would accept a total of about 20,000 former Nova students, offering such perks as no enrollment fees. More than 10,000 people are said to have accepted the offer.

The Sankei shimbun has a similar story, but focuses on Nozomu Sahashi's culpability in the largest consumer disaster since the end of the Second World War.

About 2300 former NOVA students have set up the Nova Seitonokai in Osaka. One student says she joined NOVA in October of 2003 and paid approximately ¥700,000 in advance for German and English lessons. After NOVA went bankrupt, she decided to continue studying at the new NOVA run by G.education. However, her school was far from home and the number of German lessons offered fell dramatically. She wants Sahashi to explain how NOVA failed and for him to take responsibility.

There are also questions about Sahashi's silence following his arrest and indictment (and later release on bail) for making off with ¥320 million from a staff fund in June. Since his release, he has stayed out of the public eye. Sahashi is apparently living by himself in an apartment in Osaka. The Sankei says that he is apologizing for what happened to those around him, and is currently looking for work so he can raise money to pay compensation to the students.

Sahashi's lawyers, however, insist that he did everything he could to raise money to save the company. As for stealing from the staff fund, Sahashi did intend to use the money to compensate students, but his lawyers claim that the fact he was "borrowing it in advance" raises questions about any illegality on his part. They intend to plead innocent once the case goes to trial.

The articles ends with a quick look at how G.communication is doing. The company operates 379 schools, including 126 it assumed when it took over from NOVA. Ninety percent (approx. 74,000) of its customers are former NOVA students. But even when one includes the 10,000 students accepted by 25 other schools at the request of METI and measures such as waiving sign up fees, only 30% of NOVA's students have decided to continue studying.

Everything appears to be coming to a head. The government has made no progress in trying to regulate language schools. Two former instructors are seeking to get the Osaka District Public Prosecutor's Office to re-examine its decision to not press charges for the non-payment of wages. There is also a ¥16 million lawsuit against Sahashi and his directors in the works. Sahashi, the misappropriation of lesson fees, and the "NOVA Way,"--the bicycle business model--will soon be before the courts.

Sankei shimbun article

ＮＯＶＡ破綻から１年　“ワンマン経営者”元社長は雲隠れ

2008.10.26 22:11

英会話学校「ＮＯＶＡ」（大阪市、破産手続き中）が大阪地裁に会社更生法の適用を申請してから２６日で丸１年を迎え た。元受講生約３０万人が前払いしたまま返還されない受講料が約５６０億円に上る、「戦後最大の消費者被害」となったが、元受講生の救済は進んでいない。 一方、「ワンマン経営者」としてＮＯＶＡを率いた元社長、猿橋望被告（５７）＝業務上横領罪で起訴＝は“雲隠れ状態”で沈黙を守ったままだ。

説明求める被害者

「語学を学びたいという純粋な思いを踏みにじられたことに怒りを覚える」

約２３００人の元受講生でつくる「ＮＯＶＡ生徒の会」（大阪市）のメンバーで、同市北区の会社員女性（３５）は悲痛な声を上げる。

女性は外国人の親類とコミュニケーションを取りたいと平成１５年１０月にＮＯＶＡに入会。大阪・梅田校で英語とドイツ語のレッスンを受講していたが、突然 の閉鎖。前払いした受講料は約７０万円に上り、事業を引き継いだ「ジー・エデュケーション」（名古屋市）の「新ＮＯＶＡ」に登録した。しかし教室が遠く なって通いづらくなり、ドイツ語のレッスン数も大幅に減ったため足が遠のいた。

女性は「なぜこのような事態に陥ったのか。猿橋氏はきちんと説明した上で謝罪してほしい」と訴える。

無罪主張も視野

猿橋被告は今年６～７月、社員互助組織の積立金３億２０００万円を流用したとする業務上横領容疑で逮捕、起訴された。その後、保釈されたが、公の場で一切説明していない。

関係者によると、現在は大阪市内のマンションで１人暮らしをしている。周囲に「受講生に迷惑をかけて申し訳ない。被害弁償も考えないといけない」と語り、資金繰りのため職探しをしているという。

一方、猿橋被告の弁護人は「被告自身も当時、会社を建て直すため金融機関から資金を借り入れるほど切迫した状況だった」と強調。刑事責任についても 「社員の積立金を元受講生への返還金にあてたが、当時の金の流れをトータルにみれば“前借り”したという評価もあり得る」と違法性に疑問を呈し、今後の公 判での無罪主張も視野に入れて準備を進めている。

一方、元外国人講師らへの賃金不払いを巡り、労働組合「ゼネラルユニオン」に加入する元講師２人が今月２３日、労働基準法違反罪で書類送検された猿橋被告を不起訴とした大阪地検の処分を不当として検察審査会に審査を申し立てた。

「継続」は３割弱

ジー社は昨年１１月、ＮＯＶＡから事業を引き継いだが、全国の元受講生約３０万人の大半は救済されていない。

現在、ジー社は継承した１２６校を含む３７９校を展開しており、受講生の９割（約７万４０００人）がＮＯＶＡからの継続組。しかし、経済産業省からの要請 で入会金免除などの優遇措置を設けた２つの業界団体の加盟社約２５社が受け入れた約１万人を含めても、受講を継続したのは全体の３割弱にとどまる。

語学学校との契約を巡るトラブルなどに対する行政側の対策も進んでいない。

近畿在住などの元受講生２４人が今月１７日、猿橋被告を含む旧経営陣や監査法人に前払い受講料約１６００万円の返還を求め、大阪地裁に提訴した。破綻後、全国で初めての集団訴訟となった。

多額の受講料を事業資金に注ぎ込み、自転車操業を繰り返した「ＮＯＶＡ商法」。その是非が法廷で問われようとしている。

In addition to the "hiring drive" for new instructors, g.education recently announced that franchises for its neo-Nova schools are now on sale.

Here's the announcement:

Browsing the Nova/g.education website, I came across a press release dated February 18 [PDF in Japanese] in response to the accusation that g.education had reneged on its promise to hire all former Nova staff and instructors.

The General Union is still nipping at g.education's heels over the raw deal instructors were given when they were effectively fired by not having their contracts renewed. UPDATED 03/18

G.com is on a "hiring drive" and is looking for monkeys instructors to work for peanuts. According to the g.education/Nova website, they are looking to hire 20 part-time instructors.

Here it is in case it disappears in the future: