What’s not well known is that a number of english conversation schools were and are still run by anti-social forces, some of them essentially being yakuza front companies. There are numerous ways these schools can be used as a semi-legal con-game. One is the use of attractive women/handsome guys who approach the Japanese mark and encourage them to believe that by joining the school that he/she will be able to date the person who solicits him. The other approach is to browbeat the student into paying a huge initial registration fee up front and then refusing to return the money if the student decides to quit. Others make the “victim” part of the game by embroiling them in a pyramid scheme, after they’ve paid a ridiculous amount of money for their “contract”, by offering them a percentage of the fees for anyone else they can get to enroll in the school.
The most famous incident of an eikaiwa chain being exposed for fraudulent practices was the disciplining of the megalithic Nova Group in 2007. The Ministry of Economy, Trade and Industry (METI) in June of 2007, suspended part of Nova’s business operations. After receiving numerous complaints, they concluded that Nova had deliberately deceived many of their students, and had committed multiple violations of the specified commercial transaction law, including providing false explanations to get students to register for lessons and coercing them to pay huge fees. They also illegally refused to refund fees to students unhappy with their services. Nova was allegedly connected to the Yamaguchi-gumi and in the past had used yakuza thugs to violently break-up attempts by the english teachers to unionize. The scandal resulted in Nova’s bankruptcy and the loss of hundreds of jobs. Many teachers were recruited while the company was clearly going under, and not paid, as were many of those hired before the scandal.
On August 26, 2009, the former CEO was found guilty of embezzlement and sentenced to three and a half years in prison. He claims to have been using taking out funds to pay back refunds to disgruntled students and keep the company afloat but police sources suspect that a great deal of the missing money went to yakuza backers who wanted their cut before the company went belly-up. There’s more to the story than that and if you’re really curious you should check out 実録アングラマネー 日本経済を喰いちるヤクザたち（Underground Money–The Yakuza (Dark Powers) Eating Up Japan’s Economy) for more details. It also covers in depth NOVA’s attempts to stay in business through complicated financial dealings with a yakuza business associate and stock manipulator.
The english conversation school has been and will probably always be a good business for the yakuza. The same principles used to get men and women into hostess clubs/host clubs are applied to recruit students. Just like a hostess club there is the possibility of actually dating one of the teachers dangled out as bait to keep the customer coming back. Many companies portray their schools as place where Japanese men and women can have a chance to date an attractive foreigner. The foreign workers brought in are usually under stringent contracts that allow them to be easily replaced if they become problematic and bind them to their jobs. In some cases, their apartments and travel expenses are loaned to them in advance, essentially indenturing them to the company before they even began to work. Often the apartments provided are owned by the company as well.