Nova was cash cow for ex-boss / Sahashi overcharged school chain to repay debts at other parts of group

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.


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].”