Japanese Teachers’ Benefit Fund Looted

Even by modern legal standards, it was a slick maneuver. Nozumu Sahashi, former head of a chain of English-language schools in Japan, admitted this June 1 in an Osaka courtroom to taking money from an employees mutual aid organization to prop up his company’s losses, even as his lawyer entered a “not guilty” plea. Mr. Sahashi, now 57, longtime president of the Osaka-based Nova Corporation, had been arrested last June for allegedly diverting 320 million yen (at the time, about US$3.1 million) from a teachers’ employment benefit fund to another firm which he controlled. Nova, though having declared bankruptcy, remains in operation, if in different hands and under a new name.

Sahashi founded Nova Corp. in 1990 as a successor to an English-language instruction program he’d started nine years earlier. He eventually built the for-profit company into the largest operation of its kind in Japan, enrolling at its peak around 480,000 persons. Even when the company filed for bankruptcy in November 2007, some 300,000 students were enrolled, learning from some 4,000 teachers, especially young adults from Australia. But as Union Corruption Update reported last summer, Nova had an image problem after a Japanese court found it guilty of false advertising of tuition rates. Faced with a sudden loss of enrollment, Sahashi allegedly ordered a senior accountant, Toshihiko Murata, to transfer money from the teachers benefit fund to a Sahashi-controlled Nova benefits affiliate, Nova Kikaku, to which employees contributed up to 3,000 yen monthly. The scheme collapsed anyway, leaving teachers without jobs and students without reimbursements. In Japan, one of the world’s most expensive countries, being without a job can be catastrophic.

Sahashi’s defense rests on the familiar ploy, “I did it, but I didn’t know it was illegal.” At his initial hearing, Sahashi admitted to having diverted benefit funds, and then stated, “It cannot be judged whether it is embezzlement or not.” His lawyer claimed that because the actions were in the best interest of employees, they did not constitute embezzlement. Apparently, it’s in the “best interest” of employees to have no access to their own money. Even if a judge swallows that line, Sahashi has other things to worry about. Last year two dozen former students filed a civil suit against him, his former management team and the company’s auditor seeking 16 million yen in damages. About the same time, another of his companies, Ginganet, filed for bankruptcy. A Nagoya-based company, G.communications, took over about 40 percent of Nova’s schools following bankruptcy. One hopes the passion the Japanese have for foreign languages – and one hopes, legal integrity.