Let's Japan.org Debunking Eikaiwa and Ramblings in Japan

Like many readers here, zakzak wonders about the odd combination of restaurant companies and English conversation schools.

As you know by now, G.communication, which operates Nova and GEOS, which in turn was owned by Foodys, is now owned by Hanshin Shuhan after it acquired Foodys' 50.9% share of the company. Foodys sold its shares in G.communication in order raise money when its main bank, the Incubator Bank of Japan, was shut down by the Financial Services Agency on suspicion of obstructing an FSA audit. According a source that spoke with zakzak, Foodys sold its shares on the condition that Hanshin Shuhan assumed the loan that Foodys used to buy its stake in g.communication.

Zakzak then delves into the histories of the companies involved.

• G.communication started out as a juku and branched off into the restaurant business in 2000. It started growing and acquiring more restaurants around 2005 through a series of mergers and acquisitions.
• In October 2007, it took over Nova.
• However, G.communication's mergers and acquisitions left it short of cash and its president, Masaki Inayoshi, sold his shares in October 2009.
• The shares were sold to Foodys and Venture Link. Both companies are members of the Incubator bank of Japan's network for SMEs.
• Foody's, being the largest shareholder in g.communication with a 50.9% share, jumped on the M&A bandwagon with G.communication only to have its plans go off the rails when the Icubator Bank was shut down.
• Now that Hanshin Shuhan owns G.communication, it says it will continue to operate the eikaiwa business as usual.
• Hanshin Shuhan is a liquor distributor started by its 34-year old president, Higaki Shuusaku, in 2001.
• Hanshin Shuhan was new to the distribution business but quickly made an impact by leaving free refrigerators stuffed with drinks in offices, and then making the rounds collecting money for the drinks that had been consumed. The company raked in the money by taking a page out of the Toyama okigusuri method where medicine kits were distributed to homes and customers paid for what they used. From 2009, Hanshin Shuhan also got on the M&A bandwagon.
• In May 2009, it acquired Gyukaku through a take over of Asrapport Dining. In April of this year, it acquired liquor distributor Daishuhan from the Japan Asia Group. It's latest acquisition is G.communication.

Zakzak asks, "Where is the money for these M&As coming from?" One of Hanshin Shuhan's major shareholders are limited investment partnerships with investment enterprise Orix #10 being mentioned. An executive in a business research firms tells zakzak that Hanshin Shuhan is more an investment company than anything else. If true, izakayas and eikaiwa make for strange bedfellows in the world of mergers and acquisitions.

Comment: When I was a kid I was really into trading hockey cards and playing games like "knock down," farthies" and "scramble." I get the sense that the same thing is being done with GEOS and Nova, except that they aren't particularly valuable--kind of like picking up some 4th-liner pylon in a game of "scramble." They are minor players in larger deals and will eventually find themselves discarded and clothes-pegged in the spokes of some unlucky investor's bicycle.

This comes via allblacks in the forums who quotes a reliable source:

All ex nova employees who received part of their unpaid wages after the bankruptcy (most of you should have received 80% of what was owed to you). The trustees are in the process of organizing a further payment of part of the remaining unpaid amount. If you have changed your address since the last payment you will need to contact the trustees and inform them.

It sounds like former teachers could be receiving the remainder of their unpaid wages. Hopefully I can update this with something more concrete in the near future.

UPDATE 8/20. A reader provides this memo:

Nova and GEOS are under new management. The new boss is Kobe-based food and beverage importer and distributor Hanshin Shuhan. According to the Yomiuri shimbun, Foodys, the current parent company of Nova and GEOS, is to hand over its 50.98% share in the eikaiwa schools to Hanshin Shuhan by the end of August.

Foodys was forced to give up its shares in G.communication after running into cash problems when its main bank, the Incubator Bank of Japan, was shut down by the Financial Services Agency on suspicion of obstructing an FSA audit. Hanshin Shuhan has agreed to assume the loan Foodys used to acquire G.communication along with shares in the company. The brief blurb ends with Masaki Inayoshi, the Chairman and President of G-Communication group, resigning effective August 10.

If eikaiwa ever was a McJob, Hanshin Shuhan is helping to reinforce that image by marketing themselves as a "fast food and fast beverage company." What does it say about the state of eikaiwa when it has stronger links to the restaurant business than it does with language learning? Moreover, it's not reassuring that G.communication's masters were connected to a bank engaged in shady business practices, although "eikaiwa" and "shady business practices" do seem to go hand in hand in recent years.

UPDATE 8/19: Many comments have been about what would a food & beverage company find attractive about owning an English conversation school. As noted in the comments, one reason may have to do Hanshin Shuhan wanting part of G.communication's restaurant business. A short article on Searchina says that G.communication restaurants G.taste, G.networks, and Sakai will become "grandchild companies" (indirect subsidiaries) of Hanshin Shuhan. An article in the Kobe Shimbun says that in Hanshin Shuhan hopes to beef up its restaurant biz with the inclusion of G.communication's stores.

As for the English conversation schools, the article simply states that Hanshin Shuhan will continue operating them as usual. It doesn't sound like they have any big plans for Nova and GEOS, does it? It makes me wonder if the schools will get lost in the shuffle as the company focuses on merging its restaurant operations instead.

According to the Mainichi shuimbun, G.communication is to close two schools this month in Nagano. G.communication operates four GEOS schools and two children's schools in the prefecture. The Matsumoto school will close on the 20th and the Saku school on the 31st. A spokesperson called the closures the result of an "overall management decision."

Students were informed late last month about the closures. The Matsumoto school will merge with the NOVA Matsumoto ekimae school, while students at the Saku school have been given the option of going to the NOVA Nagano Ueda ekimae school or taking Ocha no ma ryuugaku lessons via videophone.

A mother with a son who has been taking lessons for the past four years at the children's school in Saku says that going to Ueda isn't an option since it's too far away.　

A brief report in the Chunichi shimbun fleshes out the "overall management decision" comment slightly by adding that the closures had to do with unpaid rent when G.com took over GEOS. (So, G.com didn't want to pay the rent?)

An update on former Nova president, Nozomu Sahashi's, appeal. You may recall that he was sentenced to three and half years for embezzlement last August. He quickly appealed his sentence, maintaining that he was innocent.

Kyodo News, via the Nikkei keizai shimbun reported last week that Sahashi maintained his innocence again at his appeal, saying that he took money from the employee's fund to help the company, not to line his pockets. The prosecutors, of course, are trying to have the appeal dismissed.

That's all the article says. Don't know where the appeal goes from here. I take it that for now, Sahashi avoids going to jail.

The Yomiuri Shimbun reports that the charge of aggravated breach of trust leveled by the Nova administrators against former Nova president, Nozomu Sahashi, has been dismissed.

According to the report, the Osaka District Public Prosecutors dropped the case due to insufficient evidence. Although Sahashi admitted to using the telecommunication company (Ginganet) he owned to sell massive quantities of unwanted videophones to Nova, Public Prosecutors deemed that there was no intent to cause harm as Sahashi never pocketed any of the money from the sale of the videophones.

Sahashi is still appealing his embezzlement conviction.

Yomiuri Shimbun

特別背任容疑で告発のＮＯＶＡ元社長、不起訴

英会話学校「ＮＯＶＡ」（大阪市、破産手続き中）に約２１億円の損害を与えたとして、破産管財人から特別背任容疑で告発された同社元社長・猿橋(さはし)望被告（５８）（業務上横領罪で有罪判決を受け、控訴中）について、大阪地検特捜部は不起訴（嫌疑不十分）とした。３月３１日付。

猿橋被告は、自ら実質経営する通信事業会社から、不要なテレビ電話機を、ＮＯＶＡに大量に仕入れさせて損害を与えたなどとして告発されたが、特捜部は猿橋被告に資金が渡っておらず、損害を与える目的もなかったと判断した。

（2010年4月1日11時15分 読売新聞）

Let's start an open thread for kicks. I won't call it an End of GEOS thread, but if you have have something to add, comment on it here.

Today is also notable as it marks two years since Nova went bankrupt. Although Nova is a shell of its former self, it's collapse has left its mark on eikaiwa. The final chapter has yet to be written as Sahashi appeals his conviction while trying to avoid hotel visits from gangsters.

What's on your mind?

A quick blurb in the newspaper, the Mainichi reports that the three men arrested on suspicion of confining Sahashi in his hotel room have been released.

Apparently the police don't have much of a case on them. At any rate, the thugs caught with Sahashi are probably thinking, "Mission accomplished." They delivered their message.

Mainichi article

ＮＯＶＡ元社長事件：監禁容疑で逮捕の３人釈放　東京地検　

東京地検は１９日、経営破綻（はたん）した英会話学校最大手「ＮＯＶＡ」（破産手続き中）元社長、猿橋望被告（５８）＝業務上横領罪で実刑判決、控訴中＝の監禁容疑で逮捕された指定暴力団山口組系組員（３８）ら３人を、処分保留で釈放した。

警視庁は、９月２８日に東京都中央区のホテル一室で猿橋被告を監禁したとして３人を逮捕した。捜査関係者によると、組員らは警視庁の調べに「一緒にいただけ」などと容疑を否認。猿橋被告もホテル内から外部に電話で連絡を取っていたといい、地検はホテルでのやりとりについて捜査を継続する。

毎日新聞　2009年10月19日　20時42分

According to the Yomiuri shimbun, Nozomu Sahsahi, NOVA's disgraced and convicted ex-president, was confined in his hotel room for three days by gangsters. The police have arrested two men, one who is a member of the Yamaguchi-gumi syndicate, in connection with the incident.

Sahashi had apparently traveled to Tokyo, and when his lawyer became unable to contact him over the weekend, he went to the police. The police found Sahashi yesterday afternoon in his hotel room in Nihonbashi where they arrested two men whom they allege held Sahsahi for roughly 3 and a half hours. The men claim that they were merely with Sahashi (and that they didn't hold him against his will).

Many will be disappointed to learn that Sahashi was not injured. The police are investigating the circumstances of the incident.

Assuming it wasn't a social call, one possible reason for the "visit" may have to do with Sahashi's mysterious stock dealings as NOVA crashed and burned around him. Desperate to come up with some cash, he put his shares in NOVA up as collateral only to be swindled out of five million of them. One name that came up in the course of the dealings was Nishida Haruo, who appears to have made a career out of stock manipulation. Perhaps Sahashi owes some bad people some money. Then again, he is arrogant enough that you could not completely rule out him demanding his shares back, either.

Yomiuri article

ＮＯＶＡ元社長を監禁容疑、組員ら逮捕

経営破綻(はたん)した英会話学校「ＮＯＶＡ」（破産手続き中）の元社長で、業務上横領罪に問われた猿橋望被告（５８）（控訴中）を東京都内のホテルに監禁したとして、山口組系暴力団員の男（３８）ら２人が、監禁の疑いで警視庁三田署に現行犯逮捕されていたことがわかった。

同署幹部によると、２人は２８日午前１１時３０分頃から午後３時頃まで、中央区日本橋蛎殻町内のホテルの一室に猿橋被告を監禁した疑い。猿橋被告にけがはなかった。

猿橋被告の弁護士が、猿橋被告と２５日頃から会えなくなったとして同署に相談していた。捜査員が２８日午後３時頃、同ホテルで猿橋被告を保護し、２人を取り押さえた。２人は「一緒にいただけ」と容疑を否認している。同署はほかに共犯者がいるとみている。

猿橋被告は、ＮＯＶＡグループの社員積立金を流用したとして、２００８年６月に業務上横領容疑で大阪府警に逮捕され、先月、大阪地裁が懲役３年６月の実刑判決を言い渡していた。

(h/t to Are they the lemmings)

Old news is fun! The Japan Times reports on Yano Research's survey on the foreign language learning market in Japan, which I wrote about this at the beginning of August and touched on again earlier this month. The only difference with today's article is that the JT spoke with somebody at GEOS.

Susumu Ikegami, a spokesman for Geos Corp., which runs English-language schools in Japan and other countries, said they have been facing a serious decline.

"As the number of students decreased, the number of classrooms also declined," said Ikegami, who declined to give the figure for the classrooms.

Ikegami said the market's downward trend began about five years ago, although the reason is hard to pinpoint. However, he pointed out that the bankruptcy of Nova Corp. in October 2007 had some impact.

It's amazing that Ikegami can't figure out why business is down. You can try and blame NOVA, Lehman Brothers, or swine flu, but you can only wring so much mileage out of those excuses. The article ends with this brilliant plan:

However, Ikegami of Geos said the overall outlook for the language-school market in Japan doesn't appear bright.

"We have 53 schools overseas, and they are doing pretty well. So, while there is the chance of growth from a global outlook, we don't really have a good picture for the Japanese market. Rather than getting more students, we are working to run the business more economically," Ikegami said.

Things don't look good down the road, so let's cut costs? That's it? The market has been sliding for years and GEOS is still at the cut costs/efficiency stage? The article is titled "Few answers for the language market." Is the problem about finding answers to the downturn or the dreadful way in which eikaiwa schools conduct business?

My guess is that it's the latter, with NOVA being the straw that broke the camel's back. All the schools really care about is putting bums in chairs and vacuuming their students' wallets, and NOVA was the poster child of this kind of behavior. METI's press release　describes it in vivid detail, from pressure sales to exaggerated advertising to underhanded refund practices to outright thievery and deception. Other schools have tried to blame its instructors for the failings of the company or sue them for exercising their right to strike.

But the bad behavior doesn't stop at eikaiwa. Dispatch teaching is just as bad. Not only does the job have no benefits, instructors are disposable employees that boards of education pick and choose from and discard at will. Although teaching English looks promising in elementary schools, it should not be forgotten that the potentially lucrative job scene hinges on school budgets. BOEs with no money are more likely to stick with a Japanese teacher than hire an ALT.

The homestay business is more of the same. Gateway21 tore a page from the NOVA playbook with 950 million yen vanishing into thin air as the end result.

To put it bluntly, the rot is extensive, and teachers and students know it. But if the Susumu Ikegamis of the business can't understand why business is bad, then there's not much hope for them. What's the answer that eikaiwas should be looking for? How about: Stop abusing your employees and ripping off your customers?