In plain English, it was a staggering sum of money. And Nozumu Sahashi had his own ideas about what to do with it. Sahashi is the former president of Nova Corporation, a Japan-based chain of for-profit English-language schools. On June 24, Sahashi was arrested by Osaka police on suspicion that last July he’d illegally diverted 320 million yen ($3.1 million) from a teachers’ union reserve fund to the company through an affiliated firm he effectively owned. The embezzlement contributed to Nova’s already weakened condition and eventual bankruptcy – and a few thousand employees now out of a job.
Established in 1981, Nova over time had become Japan’s largest English-language educational operation. As of last fall, it enrolled around 300,000 students and employed 4,000 foreign instructors, mainly from Australia. But during this decade, the corporation had acquired a bad image – and not without reason. A Japanese court found it guilty of falsely advertising tuition rates. Additionally, Japan’s Ministry of Economy, Trade and Industry banned Nova from signing long-term student contracts. This triggered a bum’s rush by students to the exit door, their coursework uncompleted. Sahashi, 56, believed damage control was crucial to the continued existence of the company. The best way to achieve this would be to provide tuition refunds out of the teachers’ benefit fund. He allegedly instructed a senior accountant, Toshihiko Murata, 49, to transfer money from the fund to an affiliate of Nova, Nova Kikaku, which Sahashi owned and to which employees had contributed up to 3,000 yen a month. Given that this benefit plan, made possible by payroll deductions, also was controlled by Sahashi, pulling this off wasn’t as hard as it looked.
Sahashi admits to his actions, but insists he has done nothing illegal. In a brief statement, his lawyer expressed his client’s regret, but noted that none of the money had been diverted for personal use. The attorney told reporters: “Mr. Sahashi had been prepared for his arrest since late May. When I saw him this morning, he didn’t seem any different. Although we don’t dispute the facts, we doubt if he can be legally charged for embezzling employee funds in the course of business.” Former teachers and other employees take a different view. One ex-employee said Sahashi “never offered an apology to employees” over the firm’s demise. “My impression of Sahashi is that he did whatever he wanted, saying ‘that’s for the company’s sake.’” Last October, the union requested that Japanese authorities build a criminal case against him and other Nova officials. Murata, in fact, was arrested the same week as Sahashi.
Nova’s collapse – no pun intended – has had repercussions for the Japanese economy. Of the thousands of teachers employed by the schools, many have returned home or are likely to do so. When Nova was forced into bankruptcy last November, it owed creditors 43.9 billion yen ($425 million). Still, the situation isn’t all bleak. A Nagoya-based firm, G.communications Co., took over roughly 300, or 40 percent, of Nova’s schools. As for Nozumu Sahashi, he may or may not be guilty, but either way the case underscores something wrong with the Japanese model of labor relations. Having an employer manage union assets is an invitation to trouble. (Yomiuri Shimbun, 6/25/08; Japan Times, 6/25/08; The Courier Mail, Australia, 6/27/08).