Nova boss handed 3 1/2 years

AUG 27, 2009

OSAKA — Former Nova President Nozomu Sahashi was sentenced Wednesday to 3 1/2 years in prison by the Osaka District Court for his role in skimming off employee funds in 2007, just before the foreign language school giant’s bankruptcy that October.
Presiding Judge Hiroaki Higuchi’s severe sentence took some in the courtroom by surprise. Prosecutors had sought five years for the former president of what was once the country’s largest foreign language school chain and employer of foreign nationals. Sahashi is expected to appeal the sentence.

“While it’s undeniable that if Nova couldn’t refund canceled student contracts, this would have invited doubts about the firm’s trustworthiness. The defendant, as founder of the company, played a central role in this incident . . . ¥320 million is a large amount and, at the moment, it has not been returned,” Higuchi said in handing down the sentence.

Sahashi was charged with funneling nearly ¥320 million from employee benefit funds to a bank account belonging to a Nova affiliate in July 2007. He denied embezzling the funds, telling the court he used the money on behalf of his employees.

He tried to portray himself as only one of a group of senior Nova executives responsible for the decision. But the judge said that given the amount of money and his authority, Sahashi bore a heavy responsibility for the crime.

By July 2007, Nova was facing huge losses after being forced to pay refunds to students who had canceled their contracts out of anger over the school’s fee payment system. In April 2007, the Supreme Court ruled Nova’s cancellation policies were illegal, and that June, the Ministry of Economy, Trade, and Industry, responding to a flood of complaints, ordered the company to partially suspend its business due to false advertising.

Sahashi said he ordered the money to be diverted to a separate account because Nova was facing a financial crisis as there was not enough cash on hand to pay refunds to students who had canceled their contracts.

In October 2007, Nova filed for bankruptcy with debts of roughly ¥43.9 billion, failing to pay about 2,000 Japanese and 4,000 non-Japanese employees.

Katsuji Yamahara, chairman of the Osaka-based General Union, welcomed the decision, but said the case itself was not the main problem with what happened at Nova.

“Many ex-Nova employees have yet to receive their unpaid wages. We’ve been working through the Osaka Central Labor Standards Supervision Office to try to get those wages, but it’s been slow-going,” Yamahara said.

When it shut down, Nova had nearly 42,000 students nationwide and was extremely popular with Japanese students seeking to learn foreign languages. It was also well-known among foreign English-language teachers seeking employment and among its competitors, who feared, hated or respected Nova’s scale of operations.

Sahashi himself enjoyed a luxurious office suite, complete with sauna, tea room, widescreen TV and a room with a double-bed.