When Natasha Steele came to Japan from her native Australia earlier this year to teach English, she was looking forward to immersing herself in a foreign culture while earning a little money on the side. Now, after the spectacular collapse of her employer, Japan’s biggest English language school chain, Steele has found herself jobless, threatened with eviction and hungry. “I was taken out and afterward, she took me to a bakery and told me I could have anything I wanted,” she says of one charitable student. “She just wanted to know I had enough food for at least two weeks.”
For many college graduates from English-speaking countries, spending a few months in Japan teaching English is a time-honored tradition. But after Nova shut the doors of its more than 800 locations worldwide last week, that tradition is looking precarious. The closure has left over 300,000 Nova students deprived of their prepaid English lessons, and many of its 5,000 foreign language teachers, like Steele, unlikely charity cases.
Nova, started by CEO Nozomu Sahashi in 1981 upon his return from studying in Paris, grew into a publicly listed chain with over 900 locations at its peak. But things started to unravel for the company in April, after Japan’s Supreme Court sided with a former student who sued the school over tuition refunds. Its rapid expansion had been funded largely through a prepaid credit system, where students bought thousands of dollars worth of lessons up front and received only partial refunds in the event of midterm cancellations. A subsequent government investigation led to a partial suspension of Nova’s operations, at which point hundreds of thousands of students demanded a refund on their prepaid tuition. The result was the equivalent of a bank run: as students rushed to close their accounts, the company fell some $380 million in debt and in October filed for corporate rehabilitation, the Japanese equivalent of chapter 11 bankruptcy. This has made it impossible for Nova’s creditors ? mostly students and teachers demanding tuition refunds and unpaid wages ? to collect their money. For the unsuspecting teachers, this has meant a crash course in Japanese labor law. Several have taken to the streets, leading demonstrations against Nova and Sahashi, while others have held press conferences accompanied by teachers’ union representatives ? Kristen Moon, a freshly arrived American, even appeared dressed as Nova’s corporate mascot, a pink bunny rabbit that has become famous through Nova TV commercials aired across Japan. Some airlines have offered discount flights home for cash-strapped teachers, while embassies have opened hotlines to aid their near-homeless citizens. Former Nova employees last week announced a “lessons for food” program, which would allow students to pay for lessons in meals and food items. Meanwhile, the sheer number of out-of-work teachers have glutted the local labor market for English instruction, causing other language schools to stop accepting applications.
The troubles for Nova don’t end there. A report by court-appointed lawyers investigating the case alleges that founder Sahashi ? since fired by the board and currently in hiding ? had turned his company into something of a personal piggy bank, lining his pockets through such ruses as buying teaching equipment from affiliated companies and selling them to Nova students at grossly inflated prices. He is also suspected of insider trading, misappropriation, and aggravated breach of trust. (Sahashi’s representative has filed a petition refuting such claims.) On Oct. 30, one government lawyer invited reporters to check out the lavish office at Nova’s Osaka headquarters ? complete with a fully stocked wet bar and a hidden bedroom and sauna. “Sahashi is still attempting the sell company shares in hiding. I wanted to show the extent of his misdeeds,” said Osaka attorney Toshiaki Higashibatake, who organized the event. Under Japanese corporate law, Nova can stay intact if it can find sponsors to underwrite its current business. But the company is losing money so rapidly ? its market value has been halved since filing for bankruptcy ? that the search for financial sponsors has been rushed, with proceedings expected to conclude later this week. If it fails to find sponsors for a bailout, Nova faces liquidation.
It’s unlikely that the scandal will put an end to Japan’s $1.2 billion foreign language education industry. Despite a widespread appetite for learning and an educational system that mandates six years of English study, Japan ranks below North Korea on standardized English proficiency tests, according to the U.S.-based Educational Testing Service. All that is small comfort, however, for teachers who share Steele’s plight. Said Moon, the bunny rabbit at the press conference: “I love this country, but I’m in limbo and my life is on hold.”