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Why GEOS Melbourne Shut its Doors

Thanks to a kind reader, I received a copy of Ernst & Young's report to creditors on the closure of GEOS Melbourne. Many comments have been made about how GEOS siphoned its Australia schools dry, and the report offers an explanation as to how that happened. I've summarized key parts of the report to illustrate why GEOS Melbourne suddenly went into voluntary administration.

First, let's deal with the question about ownership of the GEOS Australia schools. When GEOS Japan issued its "apology" in February, it tried to downplay the affair by saying that the schools were locally incorporated businesses, that the decision to close was made locally, and that none of this affected GEOS Japan. The first two reasons may technically be true, but when it comes to that last one, the Ernst & Young report leaves you wondering how the closure of GEOS Melbourne and all of the other GEOS schools in Australia can't have anything but a negative effect on GEOS Japan. As of February, 23, 2010, the date of the report, Appendix A on page 30 carries this organization chart (click for larger image):

The GEOS Australia schools may be locally incorporated, but they are be 100% owned by GEOS Japan. Furthermore, the report states that as of October 15, 1996, Tsuneo Kusunoki was one of GEOS Melbourne's directors and that:

GEOS Melbourne is a 100% owned by GEOS Corporation (Japan). GEOS Corporation owns all 100,000 fully paid $1 shares in the Company (p.6).

The sudden closure of the school is curious given its recent performance. The table shows that the school's revenues had been increasing since FY07 (p.6).

The report notes:

GEOS Melbourne has been operating profitably for the previous two financial years (FY07 and FY09) as well as for the 6 months to 31 December 2009. Steady growth in profits has been seen due to growth in revenue coupled with a decrease in marketing, teaching and administration expenses as a percentage of revenue. (p.7)

Melbourne was profitable for the past two and a half years right up until its closure. Here's GEOS Melbourne's balance sheet.

Of concern here are the Receivables - Loan GEOS Australia Holdings and Receivables- Loan related entities under Non-current assets, and Dividends Paid under Equity. It is the loans to GEOS Australia Holdings which are at the heart of why the school closed.

Receivables - Loan GEOS Australia Holdings

The Victorian Regulation and Qualification Authority (VQRA) stopped the Melbourne school from accepting new enrollments in December 2009 after investigating an accounting report prepared for it by GEOS Melbourne. The departure of senior management personnel and the change in student enrollment hurt the school's revenues in the first half of FY10. The report goes on to say:

During the same period, a umber of other entities in the GEOS Australia Group were experiencing financial difficulties. This led to the directors to begin to understand that the ability of all companies in the Group to repay outstanding intercompany loans may be compromised. Without the repayment of these loans, the Company could not cover future obligation. It was on this basis that the directors appointed the Administrators.

The majority of excess cash generated from the operations of GEOS Melbourne appears to have been used in one of three ways, payment of dividends, loans to related entities and retained in GEOS Melbourne's bank account (p.10).

This table shows that much of the money went to other GEOS-related entities (p.10).

The Ernst & Young report concludes:

The ability of the related parties to re-pay the loan amounts outstanding was crucial to the ability of GEOS Melbourne to continue to trade. Without the repayment of the above loan, or the ability to raise cash from other sources, GEOS Melbourne did not have sufficient funds to continue operations (p.11).

The dividends of $633,755 and $1 million were paid by Melbourne GEOS to GEOS Japan (p.10). They were not cash payments, but a reduction in the balance of the GEOS Australia Holdings loan (p.11).

Receivables - Loan related entities

As for money that went elsewhere within GEOS, the report lists the following amounts (p.13):

The Administrator's comment on the money:

On 4 February 2010 the Administrators issued a demand on GEOS Australia Holdings in relation to the debt payable to Melbourne. Given that GEOS Australia Holdings did not operate in its own capacity other than to act as a holding company for other members of the GEOS Australia group, the Administrators questioned the ability of GEOS Australia Holdings to repay the outstanding amounts. Further, it is also the Administrator's understanding that a large amount of the funds provided to GEOS Australia Holdings were further lent to other GEOS entities globally and as such may not be readily available for repayment.

A similar situation exists for the amount outstanding from GEOS Cairns Pty Ltd (administrators appointed). The Administrators were also appointed to this company on 29 January 2010.

As such, the Administrators have estimated the realizable value of these assets as nil (p.13).

According to the Administrators, a school that was profitable for the past two and half years was making loans to a GEOS holding company with no prospect of those loans ever being repaid. The money is gone, funneled back to Japan and to other parts of GEOS.

Another interesting tidbit in the report is that upon taking over GEOS Melbourne, the Administrators met with representatives of GEOS Japan and related entities in Australia to discuss whether money would be made available to the Administrators so they could reopen the school. GEOS Japan gave them no money. The Administrators were forced to announce the closure of GEOS Melbourne to staff and students on February 1. For whatever reason, GEOS Japan chose to not bail out a profitable school.

Investigations

Apart from trying to rehabilitate GEOS Melbourne, the Administrators also investigated the school's business to understand the circumstances of its failure and form an opinion as to how it would act in the interests of GEOS Melbourne's creditors. Under the Corporations Act, the Administrators identified seven offenses that warranted further investigation.

  1. Failure to exercise reasonable degree of care and diligence
  2. Failure to act in good faith
  3. Making improper use of position to gain advantage
  4. Making improper use of information to gain advantage
  5. Reckless or intentional dishonesty in failing to exercise duties in good faith
  6. Failure of director to disclose interest in contract with company
  7. Being a director at the time when an insolvent company incurs a debt and there are reasonable grounds for suspecting the company to be insolvent. (p.18)

In examining the actions of the directors, the Administrators believe making loans to GEOS Australia Holdings to be a breach of good faith as GEOS Australia Holdings had no means to repay those loans (p.19). Those loans left GEOS Melbourne with insufficient funds to operate.

The Administrators identify $2,273,975 in uncommerical transactions, transactions that have no benefit or are detrimental to the company. Of that amount, $725,521 went to GEOS Australia Holdings and $1,144,500 to GEOS Japan, with the remainder going to other GEOS entities ($220,000) and a $1 million dividend. Here's a breakdown (p.21-22):


The Administrators concluded that GEOS Melbourne received no benefit from these transactions and that the loans left the school with no money to continue operations (p.22).

On the other hand, the Administrators found that GEOS Australia Holdings did benefit from the loans and may have become insolvent had it not received the money since it had no other means of generating income. The Administrators still do not understand the purpose of the loans but believe that "…in the past 18 months, approximately $1.36m was made available for the purposes of transfer from GEOS Australia Holdings to GEOS Corporation (Japan) or other GEOS entities (p.23)." Unfortunately, the Administrators feel that recovering the money from GEOS Japan is unlikely due to the cost involved, but think that going after the related companies may be worthwhile. However, without funding from creditors it doesn't appear that the money will ever be recovered.

Unreasonable director-related transactions (UDRT)

The report notes that some transactions between with GEOS Australia Holdings may be UDRTs as the directors of GEOS Melbourne are also directors of GEOS Australia Holdings, and one director of GEOS Melbourne is director and chairman of GEOS Japan (p.23).

Insolvent trading

The Administrators ask two questions:

  • How likely were the loans made to GEOS Australia Holdings to be paid back?
  • Is it reasonable to assume that GEOS Australia Holdings was insolvent? (p.24)

This matters because GEOS Australia Holdings' net assets over the past three years was negative. If it was trading while insolvent, the actual date the loans was considered unrecoverable needs to be determined in order to take action against the directors (p.25).

However, the directors did place GEOS Melbourne into voluntary administration when they were aware that the money from GEOS Australia Holdings would not be recovered, so they may have a valid defense against any recovery action. Although it appears that GEOS Australia Holdings was insolvent for some time, further investigation is required to determine the point it became insolvent .

The dividend

As already noted, a dividend of $1 million was paid to GEOS Melbourne's shareholder, GEOS Japan in the form of a reduction of the outstanding loan from GEOS Australia Holdings (p.25). Since no cash was involved, there is nothing to be recovered. The Administrators also note that by law, dividends may only be paid out of profits and that statutory and common law principles have to be applied in assessing whether or not the dividend complied with the law.

Recommendations

The Administrators are of the opinion that their appointment should be terminated, that GEOS Melbourne is insolvent, and that it should be wound up by the Court. They recommend that it is in the interest of creditors to place GEOS Melbourne into liquidation (p.26). However, as of this report, the Administrators believe that there will be insufficient funds to pay any unsecured creditors (p.27).

That's the bulk of the report. The money funneled off the Japan will likely never be seen again and GEOS Melbourne doesn't have any assets of value with which to pay off any creditors.

Japan: 

Comments

Breathtaking! Actual facts supported by actual documents! So the bottom line is Geos Japan raped Geos Australia. This is the worm eating its own tail until it's all gone.

They sunk their own battleship!

Mind-blowing. The immediate effect of this should be a shot of pure terror to all resident directors in other international GEOS entitities. Are they also at risk of prosecution for the local legal equivalents of unreasonable director related transactions? If they are knowingly allowing their own schools to be bled dry, then they may be acting illegally. If this is the case, the only defence, as noted above, is to put the entities into receivership. Mr Kusunoki will not pursued, but local directors will. This link has to go immediately to all GEOS international offices. I don't know the directors but I will copy again all other email addresses. The local managers and staff, if they have any brains, will pass the information on to the local directors (who should know) (And there is a very minor, but possible risk to officers as well as directors in some countries.
International GEOS Directors. Go see your lawyer now!!
And actually local managers and administrators should take legal advice now too - you never know.

Who are the GEOS company directors in: US, Canada, South Africa, UK, Ireland etc? Can anlyone post company records on Lets?

Excellent reporting. Well done.

AS at today. ASIC records show GEOS Australia Holdings as registered and in business. And, boys and girls, have at look at the 17/2 activity.....who shifted in or out???? Anybody know?

Extracted from ASIC's database at AEST 16:35:36 on 09/03/2010
Name GEOS AUSTRALIA HOLDINGS PTY. LTD.
ACN 082 803 889

ABN 41 082 803 889

Type Australian Proprietary Company, Limited By Shares
Registration Date 29/05/1998
Next Review Date 29/05/2010
Status Registered
Locality of Registered Office Brisbane QLD 4001
Jurisdiction Australian Securities & Investments Commission

These are the documents that ASIC has most recently received from or in relation to this organisation. Page numbers are shown if processing is complete and the document is available for purchase.

17/02/2010 026362939 370 Notification By Officeholder of Resignation or Retirement

What an interesting world we live in!!!!

"The ability of the related parties to re-pay the loan amounts outstanding was crucial to the ability of GEOS Melbourne to continue to trade. Without the repayment of the above loan, or the ability to raise cash from other sources, GEOS Melbourne did not have sufficient funds to continue operations (p.11)."

what part of the above sentences do the previous posters NOT understand. GEOS Melbourne may have been in fine shape, but the other locations were leaking like a sieve and they brought down the entire mess.

"The Victorian Regulation and Qualification Authority (VQRA) stopped the Melbourne school from accepting new enrollments in December 2009 after investigating an accounting report prepared for it by GEOS Melbourne."

as we saw with NOVA, when you stop new enrollments, the whole system crashes to a halt.

THIS IS A CASE OF AUSSIE GEOS PUTTING A GUN TO ITS OWN TEMPLE AND PULLING THE TRIGGER!

those here thirsty for blood will have to starve a bit longer...!

Here u go....

•Harold S Nathan
•Ikumi Miyamoto
•Tsuneo Kusunoki

go to this site for more details of the honchos

http://www.corporationwiki.com/New-York/New-York/geos-new-york-corporati...

GEOS New York Corporation is the entity that has its fingers in most of the NA GEOS pies

When reading financial figure and accounting reports it good to slow down a have a little think about what they are trying to say. No, GEOS Melbourne's big problem was not ceasing new enrolments in Dec 09. The big problem lay in their current assets (round figure, $800k)compared to their current liabilities (round figure, $1.8 mil). (You will note that row 19 of the balance sheet should be more properly titled "Total current liabilities".) It wouldn't matter if a hundred or so new student bodies arrived on the doorstep of GEOS Melbourne in Jan 10...it would simply have added to that liability line.

We are looking at a very flawed business model here where significant sums have apparently flowed out of the enterprise and off to somewhere else. If there is any gun smoking, it the gun of whoever authorised those transfers. And this is going to possibly be an issue for senior mamagement. Its possible that the authorities will go looking foe defacto or shadow directors. Since the GFC, this area of just who makes the decisions inside a failed enterprise has become of real interest to the regulators.

So, culpability extends beyond company directors. Who then are the 'shadow directors' or 'de facto' directors in Canada, South Africa, US, UK, Ireland etc etc. These are 'officers' of the company. If any of these schools have similarly been drained, any one of these officers or 'de facto' directors with half a brain cell will be demanding repayment from Japan right now in writing, and then within a week or two pulling the plug if money is not received immediately. Self preservation usually prevails at the end. These people don't seem to be identifying themselves on this blog though.... ????

I agree with @15:46.

What's called "income received in advance" under he current liabilities is nothing more than a deposit that the students paid in when they paid their tuition money. They pay in advance.

That cash money was not "profit" or even "revenue". It was money taken on a promise to perform later. Against that promise to perform later would have been the expenses of those periods. In a service industry, this is primarily salaries.

So the money must sit as a liability until it is actually earned.

When a bank fails, it's because the cash deposits went out on loans that can't be paid back. Here, the students' deposit money looks like it went out on dividend payments to other GEOS entities.

This is a trickey time for the executive who are linked to the wreckage of GEOS Oz. ..7 schools.... a management services unit and a holding company all identified in the EY Reports. There were three directors and a plethora of management. The question that could be asked by appointed administrators, subsequent liquidators and the regulators is "who was making significant decisions for the comapny?" Simply the directors? We don't know what answer might be supportable but you can feel the elephants in the room getting a bit restive. The significant actors may decide not to ask the question but there area lot of professional fees slopping around to be serviced.

@15.12 , Just which other locations were leaking like a sieve???? Which weren't???? Melbourne was 'ok'. Interestingly enough, Melbourne 'owed' money to Perth... as did Cairns, the National English Academy (who was that anyway??) and Canada.
The Perth report also states:
"On 4 February 2010 the Administrators issued a demand on GEOS Australia Holdings in relation to their debt payable to GEOS Perth. Given that GEOS Australia Holdings did not operate in its own capacity other than to act as a holding company for other members of the GEOS Australia group, the Administrators question the ability of GEOS Australia holdings to repay the outstanding amounts. It is also the Administrator's understanding that a large amount of the funds provdided to GEOS Australia Holding were further lent to other GEOS entities globally and as such may not be readily available for repayment." (my emphasis) p.13
Later they say on p.23:
"The Administrators have endeavoured to understand the use of the funds by GEOS Australia Holdings, and to date it appears that they may have been made available to a variety of GEOS entities across the globe in the past 18 months, in particular GEOS Corporation (Japan)."(my emphasis again). and on the same page... "Pursuit of GEOS Corporation (Japan) for recoveries is likely to be costly with no certainty of the repayment of monies. In the event that creditors or a third party funder chose to fund the action against related companies, the Administrators believe the action may be worthy of pursuing."
DAMN, I've got about $2 to put towards it. How about the rest of you?

Excellent reporting Shawn. It is good to see these extensive facts and figures rather than idle speculation.

Stupid question, but who appoints the directors to GEOS Melbourne? GEOS Japan since they are the 100% owner ?

How widely is the collapse of Geos Australia being reported in Japan at the moment?

on p 26 of the Perth report, mention is made of "property potentially available for recovery."

"It appears that two of the directors own property in Australia (New South Wales and Queensland). Further investigations are required in order to ascertain the equity valuation of the properties."

Let's play 'Guess which director DOESN'T own property in Australia and thus is not at risk of losing it'. I wonder if the answer is the same as 'Guess who resigned on 17/02?

Is there any significance in the payment of $100 000 to something that reads ( not scanned clearly) to something Loana Holdings US UK and Kr. 31st Jan 2009 listed in list of uncommercial transactions above. Presumably if this money had been paid back it would not make the list of uncommercial transactions. Is this circumstantial evidence of working capital shortages in Korea, US and Canada? Or at the very least, insufficient capital from Japan or locally to expand? Any forensic accountant experts?

Do the marketing expenses include offshore 'commission' They probably do because the figures are so high. Much more than a few plane trips. Or were there padded invoices for marketing services from Japan totalling millions? If the marketing figure includes commission, then the increase in marketing expenses would actually indicate that income net of commissions only slightly increased. And to achieve this very small increase, commission payments as a percentage of payment had skyrocketed. Alternatively if theincreased marketing expenses were from GEOS or even advertising etc this would also show a large problem. I therefore question the sustainability of this sort of commission-led (or ridiculous marketing expenses-led) growth. Now this is only guesswork - but the picture of a profitable school needs to be qualified a little. To me it looks like a desperate Japan was instructing Australia to bid higher and higher to get growth and cashflow. So even without balance sheet issues there seemed to be some very odd things happening
And finally - why suddenly no marketing costs for the last 6 months of 2009?

What property do the Directors and 'de facto' directors and senior company officers in UK, Ireland, US, Canada, Korea, South Africa etc own?

Better than Watergate. Link to this page should go to everyone in the industry.

The 31/1 entry is probably a typo for Loan(s). So the entry records money out from Australian Holdings (which was acting as the money box) to Canada (yep), UK and Korea. From these accounts we don't know why the money was moved out from Australia and whether it stayed in those destination countries or was washed out to somewhere else.

The notes to the accounts say that Commissions payable to agents are included at items marked Note 2. These figures are apparently cobbled up from income statements audited by BDO Kendalls (Qld) and some unaudited stuff for 2009 and it's a bit confusing as to where the commissions are actually living in the accounts.

If it is a hassle, how about scanning a pdf and just putting a link to it sitting on the net?
Shawn? Uncle Arthur?

Or could someone simply that Ernst and Young joins the 21st century and supply electronic versions?
The world waits

Those excerpts are almost word for word identical to the Melbourne report. It makes me wonder how different the situations were at the schools. I suppose some were better than others. Does this mean that GEOS Japan took equally from all of them?

Shawn
Let's Japan.org::Blog

Page 4 of the report says the administrators were appointed by the board of directors of GEOS Melbourne on January 29. As for media coverage, apart from a few short articles on the initial closure of the schools, there has been no reporting on this story in Japan, as far as I know.

Shawn
Let's Japan.org::Blog

The figures for 2010 YTD look suspect.
Here are some simple percentages for costs as a percentage of revenue for June 07,08,09 and 10 YTD (10 YTD 7 months I presume?)
For 'Marketing' 25% then up to 29% then 29% then 1% (this last figure is very odd)
For teaching wages: 28%, 28%, 28% then 49% (This last figure is odd too - Was this redundancy money or something?)
Many interpretations are possible. Some caution is needed for the last six months.

Shawn has a real advantage over me as I cannot scan paste direct to LJ like he can. I did cover the essentials in my earlier report. The Reports tend to be a bit boiler-plate. The Melbourne one has a whole lot of loan data that the Sydney one doesn't. The Sydney Report, like the Melbourne one, indicates that there are areas of the Corporation Act/Directors that might warrant further research.

Luke Slattery on The Australian newspaper is interested in this whole GEOS area. Could folk please send him copies of their respective school EY Reports via:

Luke Slattery
The Australian Newspaper
2 Holt Street
Surry Hills
NSW 2010

This is a hot-in-the-fire time for this type of story as today's Baird Report to Federal Government recommends a series of initiatives to cope with these collapsing schools. Luke is a top writer and would enjoy an exclusive on this saga.

With this post, I'll say goodbye 'cos it's time to move on, forget MrK and GEOS, and have a bit of fun in a different line of work. Boys and girls, it's been a pleasure (and PS the best of luck to those of you working for GEOS Japan)

LJ hardly ever hears from American GEOS teachers. But here's a bit of news from NY. GEOS NY this month are contracting from two school sites down to one. Keep that radar up for other signs of contraction and cost-saving across the US/Europe.

There is a lot of truth on this site, especially about the demand for cash from schools by Kusunoki. But the contraction of the New York schools from one to two was made long ago and is due to a dispute with the landlord (and, frankly, the poor facilities) in the Empire State Building. It has nothing to do with this issue.

GEOS is in trouble. Last week they moved their corporate HQ from a large two floor office next to Osaki station (1st and 2nd floor) to a much smaller one floor (on the sixth floor) office next to Uchisaiwaicho station.

Their income has been hurt badly by the economy. People can't afford to send the kiddies to eikawa classes if papa doesn't get a bonus.

I'm a Geos teacher. As I've ALWAYS been paid on time despite all the haters on this joke of a website, I have to admit that I was fucking disappointed to walk into the office today & see the Japanese teacher and manager milling over kuchikomi. Not once have they expressed any kind of fear for the company's future during our casual day to day smalltalk, but there they were gossiping away as I walked in. The manager quickly closed the browser window, and although I mentioned that I'd heard of kuchikomi and the Japanese teacher acknowledged that they were indeed reading it, the Japanese teacher kind of avoided the question when I asked, "So what are the guys on kuchikomi actually saying about GEOS?"

She did later confess that the manager thinks I'm going to quit Geos, which I am... and even though I will give them a month or so notice, there seems to be the impression that if native teachers quit, it's game over. The manager seems to think that if I don't know about the chatter on kuchikomi, I'll think that all is well with Geos and just continue turning up to work every day until they start to fuck me out of my legally earned paychecks. However, as my manager barely speaks a lick of English, I'm sure that she doesn't know sites badmouthing Geos (like this one) actually exist in English, and thus she probably thinks that I'm completely ignorant to what's going on. I doubt that the gossip on kuchikomi is any worse than the gossip on here, though (except for that "you're a Geos stooge!" faggot constantly trying (and failing) to scaremonger).

I Finish at the end of the week and my students are being told the the school is closed next week. They cant find teachers to replace teachers leaving.

Yeh, yeh, yeh. You are right, closing of the lovely ESB school all planned years ago. Vibrant Chelsea is the place for us to be. And GEOS Australia is fine. And the roses in the garden are beautiful.

Hey team, keep a eye out for other contractions and cost-savings across US and Europe. Bloodhounds, let's go!!!!

What a coincidence. It was the same here at Sydney GEOS in the last months. I struggled with communicationas "as my manager barely speaks (spoke) a lick of English"!!!!!

Oh you must be talking about the Korean Lady, yes I knew her from about 4 years back, she was the receptionist and got the big promo after the real Manager left telling kuzunoki to stick it!

I Finish at the end of the week and my students are being told the the school is closed next week. They cant find teachers to replace teachers leaving.

C'mon, which school? You're leaving at the end of the week so there's no harm in telling us. Vague statements without substance are not really of any value.

I was living under a large rock at Nova before my pay was late for two days in September. A blessing in disguise really as the teachers in Tokyo and Osaka were paid on time, Nova figured they were closer to an international airport and probably had spent the previous months wage already. This set my spidy sense off (a little late admittedly) and me and a couple of coworkers quickly found this site. People can knock this sight all they like but until they have experienced the insanity that is an Eikaiwa collapsing around them and had the benefit of this site to find out what is really going on I suggest showing a little respect. You will always have the hardliners, either delusional or in some sort of pact with the devil involving their sole. These are the people who refuse to see the truth and will be in the bunker to the bitter end. Then you have the hater these guys are summed up quite well by Alfred in the Dark Knight “Because he thought it was good sport. Because some men aren't looking for anything logical, like money. They can't be bought, bullied, reasoned or negotiated with. Some men just want to watch the world burn.” I am little more sympathetic to the hater though because most of them probably have either A worked for a horrible Eikaiwa or B been burned badly by one. Obviously both of these groups have very different agendas, some of them may even pretend to be the other in an attempt discredit the other side. The truth usually lies in the middle, except with the case of Nova as even the people bagging that company out of spite failed to adequately describe its level of evil(employing a couple from the US only a couple of weeks before they went bust is one of many examples I’m personally aware of).

Logic is you greatest weapon take a fact and reason from it. With Nova it was easy for me they paid Tokyo and Osaka teachers on time and other schools two days late. Nova’s excuse a banking transaction error, this was a poor excuse as my branch of Shinsei was Tokyo even though I lived in Tohoku. The only adequate explanation was Nova didn’t have the money to make payroll, this combined with the student lesson refunds, Japanese staff not being paid for over a couple of months put the writing on the wall in a big way, not big enough for some though.

Now I don’t work at Geos nor have I but those who do can learn a couple of things from Nova’s collapse. Nova went to great pains to pay its teachers even when it didn’t have the money because they provided the product it sold, no product no money “game over man!”. Nova stopped paying Japanese staff, office rent and utilities and teacher’s rent before not paying teachers. One can only assume Geos would take the same approach so look for evidence of this and attempt to verify it. Nova was clever in the fact that there was essentially very little communication among teachers from different schools, some of the stories that appeared on this site were difficult to verify at the time as people prefer to keep their anonymity by not being very specific. A simple solution is just to ring around schools and investigate yourself. The communication from staff and foreign managers to teachers was akin to the old adage “loose lips sink ships”. At Nova the Japanese staff and foreign managers while probably having no idea of what old Sarahashi was really thinking still knew far more about Nova’s dire financial situation than they let on. When a Japanese staff member openly admits to being worried there is something going on. Now generally with big faceless Eikaiwa’s and dispatch companies from what I have experienced and heard only real tools are promoted to higher positions, with any rule though there are exceptions, sometimes there are good responsible people promoted who have values, when these people unexpectedly leave be worried.

I saw a lot of good people hurt by Nova’s collapse some of them probably shouldn’t have been so naïve but still it was a shitty situation. I genuinely hope that this fiasco with Geos Australia isn’t a precursor company wide collapse as I take no joy in seeing people lose their Jobs as many people on this site will agree. My advice is simple use your common sense and don’t let the extreme opinions distract you from objectively looking at the evidence and coming to your own conclusion. On a separate side note don’t get caught with you pants down like so many Nova teachers by having no savings to fall back on when they didn’t get paid.

"sometimes there are good responsible people promoted who have values, when these people unexpectedly leave be worried."

Hmmm...... lots of those in a position to know more than the teachers (both Japanese and English speaking) have quit in the last 18 months(GEOS Japan and Overseas Schools). Time to follow suit methinks.

I knew several Japanese managers who woked at North American schools. From the beginning of 09 they were pestered daily by Mr K to send cash to Japan. Apparently his demands became more desperate and aggressive throughout the year.

Can anyone confirm if the Australian schools had the same demands made with such frequency?

I wont tell you which school and leave myself open to civil action, which they would be quite within the law to do so and would have grounds to do it also if we pushed the wrong buttons it might blow up in ones face. I am not that stupid and why does it matter anyway. I dont care if you think the iformation is false,which it is not.

And how were things at the end in Melbourne? Who was sitting in the boss chair? Any comments from South of the Border gratefully received :-). What a business model for success. Dominant CEO and at the unit management level we have (sorry, we had) ???????????.

I've just posted a copy of the EY Sydney College report to Luke. Perth, Adelaide etc can u plse do same.

"Yeh, yeh, yeh. You are right, closing of the lovely ESB school all planned years ago."

Before the global economic crisis, the Empire State Building indicated that they would not be renewing the GEOS lease as they were looking for larger clients to take whole floors and multiple floors of the building. The only reason that the NY school had two campuses in the first place was Mr. Kusunoki's insistence that the school expand. It never made economic sense to have two NYC rents and double the operating costs.

Cost-cutting measures make sense in business.

"Cost-cutting measures make sense in business."

Sure..... especially when your enrollments are nearly non-existant due to a complete lack of confidence in the GEOS brand.

"Sure..... especially when your enrollments are nearly non-existant due to a complete lack of confidence in the GEOS brand."

Again, factually untrue. So, sadly, you're not so "in-the-know". North American enrolments for the past 5 weeks are up compared to the same period of time last year.

There are certain agents in certain countries that have temporarily stopped sending based on events in Australia, but overall bookings are up.

Interesting that you would present things as facts when you do not have access to those facts. That would imply that you are intentionally trying to damage the operations of the company, which is too bad.

... is talking nonsense. The GEOS brand + these NA schools are toast & s/he knows it.

'North American enrolments for the past 5 weeks are up compared to the same period of time last year.'
Obviously this incredible claim cannot be proved, but look at the key Korean market to see why the claim is counter to logic.
In December last year the CEO of IAE Eduhouse in Seoul sent a directive to all his offices (Arguably this is the biggest agent in Korea) saying NOT to send to GEOS. He had found out that GEOS was 'for sale' and had sought clarification directly from Kusunoki. No explanation was received. He then issued the directive.
KOSA, the Korean agents association, which is always a hotbed of gossip exploded with GEOS rumours at this time as well. Most of these agents are not country specific, but international - So the same agents who had their fingers burned in Australia are staring at North America.
If a school in say Canada collapses, and fees are lost, most parents will attempt to sue the agents. This is a huge risk, and could make an agency bankrupt. Even if they do not get the money - have you ever seen the TV footage of Korean people riled up about something? (Molotov Cocktails) Korean people angry are very fierce, and no agent wants to even risk that. Even if they avoid being firebombed by angry parents, their own brand and reputation will be severely damaged by sending to a school.
We know the Chinese market has been directed not to send to GEOS by the Chinese government.
We know that the GEOS collapse is big news in Colombia.
Kaplan, who are a competitor have a close connection to a leading and very very influential Swiss agent who through the popular IALC agent workshops and similar connections can easily communicate with a huge chunk of European, Russian and Brazilian agents - not to mention the entire KAPLAN network.
So - that is trouble in: Korea, China, Colombia, Switzerland, Other Europe, Russia and Brazil!!! So which markets are up?
Finally, agents are not stupid. The see the same clear signs of distress: Not putting a little money in to save a cash-cow, delays and denial from head office -followed by insulting lies 'GEOS Australia? Never heard of them' They know about staff shortages in Japan, late payments to J-staff in Jan and February. They know that AEON has racked up the pressure aggressively - including playing with a fee guarantee - precisely at the time Japanese consumers want it and of course GEOS can't afford it. And mostly, they live by being judges of character. The character of the GEOS response has been to tell the most outrageous lie in the history of the industry. It doesn't pass the smell test.
There are lots of choices of schools in every city internationally. Even the most risky and commission driven agents will wait and see for at least one year before regaining confidence.
And finally, GEOS New Zealand and Melbourne were all increasing turnover year to year... GEOS abandoned them. So EVEN in the unlikely event that your claim is correct, you are still in peril.
As an aside - any increase could be a side effect of new regulations in the UK - which will mean dramatically increased risk for the UK Domino
My question to you 4:40 is ... Given that you seem to have access to the figures, have you seen a lawyer yet to determine your potential criminal liability? Has Japan taken dividends and loans out of student fees in advance? Remember - post GFC regulators are very interested in who makes the decisions - who are the 'de facto' decision-makers. (Read the list of potential criminal charges in the E Y Melbourne report and see what the US equivalents are)

You never see any posts from NA GEOS teachers. But mention the NY contraction and student numbers (hey, amigo, ¿agentes españoles están hablando con usted ahora?) or poor old Calgary in the betting stakes - and, suddenly, the Yankee GEOS spinners are out of the woodwork. Come on. NA GEOS teachers, give us the real information.

10/3/10 ASIC advised that the schools have now been moved into voluntary liquidation.

Nambu General Workers Union is no more. The only thing protecting english teachers in Japan was forced to close due to poor management of the union.

nambufwc.org

Are you sure about that? Jeez, only a few days ago they had their usual "March in March".

http://search.japantimes.co.jp/cgi-bin/nn20100308a2.html

What a coincidence. It was the same here at Sydney GEOS in the last months. I struggled with communicationas "as my manager barely speaks (spoke) a lick of English"!!!!!

I wasn't a huge fan of this manager, but she spoke English more than barely. She just had not management skills...

"The so-called "insider" @ 04:40 above ...
... is talking nonsense. The GEOS brand + these NA schools are toast & s/he knows it."

There is occassionally some accurate (and helpful) information on this page. But that would be outweighed 50-1 by unsubstantiated speculation. What's even more amusing about this unsubstatiated speculation is that there is often an inverse relationship between the accuracy of the comments and the confidence with which it is presented.

So "The so-called "insider" @ 04:40 above ..." at 8:10, I'll bet you $100 USD to your favourite charity that the NA schools are not toast. I'll leave it to your good conscience to pay up at a future date of your choosing when the schools don't go anywhere. You can send it to Oxfam for me, in the name of "4:40".

Canna agree with Mr 7:23. Student placing agents across the world are "not relaxed" now with putting their people into GEOS anywhere. Prospective students frequently consider things like the cost of living and safety and transport costs and the GEOS track record and lack of immigration opportunities when they look at NA. So, we'll have some butter with our toast, thanks, when we have a think about GEOS NA. Any bets would be a hundred bucks on the nose for Calgary being first one down (anbody remember GEOS Halifax???) with fifty each way on Capetown waggling its legs soon. The cracks in the corporate are widening and the cement for repairs is no longer available from the Oceania Group (hmmmmm...Capetown is/was part of the Oceania Group.....)

A previous comment mentioned that there are still many people whose livliehood depends on the survival of GEOS. This is true.

However, it also true that the creditors of Australia should not have to abandon their claims simply because it may affect the future of other GEOS regions. Remember the E&Y reports state the inability to repay loans was the reason why Australia ran out of working capital.

The way I see it and hopefully the Liquidators see it the same way, instituting legal action to recover these loans will not be a costly exercise. Letters of demand will be sent through lawyers in the respective countries demanding repayment. Failing to respond to the LOD will lead to a writ being issued and failing to respond to the writ, a judgment will be taken out. Armed with a judgment, assets will be seized, sold and the proceeds made available for distribution to creditors. The assets would be the desks, chairs, computers and property if there is any and providing it is unencumbered.

If however, the regions do make repayment of loans when demanded, or make some sort of repayment plan, then we need to ask the question why did it have to take the collapse of Australia for this to happen? Why did regions not make repayment of their loans when requested?

We can only speculate that regions did not repay loans becuase they could not afford to. This does create a doubt as to the financial viabilty of the other regions and whilst they may be 'limping' on, they cannot simply ignore their loan obligations as insolvency does not 'wipe out a debt'

I would imagine it would be a universal principle that where one cannot meet their obligations when they become due and payable, one needs to question their solvency.

Once again, looking at the two E&Y reports that have been posted for Melbourne and Perth, the cumulative profits only for these two schools over the three years does not show a school in trouble and the creditors of these instituions do have the right to expect some sort of compensation.

To institute legal action to recover a debt is not 'vindictive'.

What would it take to take the above assurances about NA more seriously? Copies of accounts or student numbers? Repayment of loans to Australia?. Transparent information about fee protection arrangements. Lists of countries which are apparently up for forward bookings. THe integrity queston is particularly pertinent. THe NA regional drector has not yet responded to repeated comments on the devious portrayal of Australia as being some kind of independently managed entity. Without addressing this elephant, why would anyone believe assurances from NA. So come on NA boomers - some facts or logical reasoning please.

Why are these people "fall guys"? At least one of them is known as a real a-hole, Mr. K boot-licker.

The person who spoke in-depth about the spread of bad work amongst the agents internationally, very intelligent observations. You are obviously not a GEOS manager goon.

INTERESTING to note that on the GEOS NYC Web site, the main manager (not the general one, as they have two in NY) is not showing under staff. Is he MIA? Ashamed? Or will they drop one of the managers in the new, down-sized school? We know he has posted on here...

Everyone should also read up on the other thread on this site about the collapse. A lot of good stuff on there now...inside info.

What is the relevancy of these people?

wendy@geos-europe.com;uri.carnat@geos.net;ebenlau@geosing.com.sg

These are various GEOS regional directors. If you read the Ernst Young report for Melbourne there is reference to various potential illegalities committed. For example, any person -officer or director or 'de facto' director etc who is a key decision maker and who knowingly allows non profit fees in advance to flow offshore may be liable for criminal prosecution - in some countries and in some situations. Usually it is Directors who are liable, but other high level staff are potentially liable. THerefore some brave person should advise these three to read the report for Melbourne and take legal advice. You can regard this comment as hostile, but in fact if you think about it, you could be doing them a the biggest favour of their life. And go and google the 'Nuremburg defence' to complete your education.

Well, it would not surprise me if Uri Carnat of NA was involved more than most know...In the past year and a half, he has made many odd trips to "visit agents" in South America and Mexico. Padding expenses for Mr. K? And many know that GEOS Canada has had their coffers drained last year like Australia...GEOS Montreal is one of them...Uri Carnat is there. Connect the dots.

Yes, these "directors" would be wise and not try to convince agents and others of "nothing being wrong", because when the dominoes fall...

In my CPA days my advice to managers was to avoid the job title "Director" like the plague. If things get hot and liquidators are around it's conforting to say that one was a "Something Manager." Not always a total defence against charges of being a shadow director, sadly.

Ms or Mr CPa - What is your advice about issuing public statements that 'things are OK'
What is wrong with that?

Directors as we know (and I am sure this is a universal principle in law) must act in the interests of the company.

True managers, may be regarded as officers of the company. It is well established by now that the transfer of funds from Australia to Japan or loans made were done by the Directors, the managers having no authority to transfer funds. Assuming a manager 'instructed' a Director to transfer funds and assume the manager knew this was wrong, the duty is with the Director to refuse as it is not in the interests of the company. I am not aware of any rule where a Manager can override a directors authority. If the Manager transferred the funds without the authority of the Director's then we can look to them as negligent. In Australia, managers were responsible for meeting current operational costs, not authorising transfers of loans. This was outside their mandate. It has been said somewhere in this blog that most of the managers have kept a very detailed account of their concerns as to the transfers and loans. If this is so, then they have taken reasonable steps to alert the Directors. Negligence is a an objective test. Subjectivity has no place in determining whether one is negligent or not. So the test of negligence would be "would the reasonable Director, knowing that there was insufficent fuunds in the accounts, taken the money from fees in advance?' If the answer is NO, then the Director has been negligent.

Where I see a potential problem for Managers, is knowing what the situation was or is, put out statements providing asurance that 'all is OK' and third persons relied on this information to their detriment. Here too, apply the test of reasonableness...'would the reasonable manager, knowing things were not good, put out a statement assuring third parties that all was fine and to continue to send students with confidence?"

Current Managers in NA, Europe and Asia should approach with caution statements they may make to third parties.

A statement by Mr K that Australia was only using the GEOS name is woeful and blatantly untrue. All those associated with preparing this statement and any other previous releases should be made to explain. For example, the release of the statement on the 4th December providing assurances that all was fine, thanking agents for their support and continued support, was signed by Mr K....but was he the only contributor to it? He must have had his PR people with him to prepare it. It was released to the world and if the Directors knew it to be untrue, what steps did they take to stop the release?

Regarding your last paragraph CPA, the regional directors put out this signed statement echoing the grossly misleading claim that GEOS Australia was a separate entity. However they certainly knew that the normal GEOS overseas structure was local incorporation but 100% ownership and financial control by GEOS Japan. If this little statement disappears it doesn't matter because there are copies.
http://www.geos.net/pdfs/Joint-Statement-Re-GEOS-Australia.pdf

It's OK if it's OK. If it ain't OK it can be strategic but it often comes back to bite.

In sentence 1, substitute should for must.
In sentence 5, abandon any thoughts that there are "rules" in the business world, it's not Monolpoly.
The GEOS situation we are looking at involves 7 pty units, a mangement pty, and a holding company. We see three Directors. One is sitting in an office in Tokyo, another is working out of Sydney, another new chum is in Brisbane. All spread across a continent. Then you had bods in senior management and management positions. . Slopping around under that were a range of untrained and compliant administrative staff. In the reality of day to day GEOS Oz business, just what was going on? Who were making the decisions on a daily basis. Who was deciding what and doing what? Can we say that thee 3 Directors had their hands on all the financial wheels? This GEOS Australia debacle has the potential to be one big mess for Directors and senior management if the liquidators decide to get their teeth into it. And the problem is that you can now observe significant administration and liquidation costs mounting that need to be somehow satisfied.
Gawd, looking back on this, morass you have to ask just who was advising MrK? You almost feel sorry for him. And, entering murky waters, just what have the Australian regulating bodies been up to in recent years in terms of monitoring and understanding how companies like GEOS operate. As a turned out GEOS Oz teacher, I reckon myself rather lucky when I realise that I can absent myself from the pile of issues that will need to be resolved. Goodnight, I'm off to the pub!

As a turned out GEOS Oz teacher,

Thank you for your input GEOS Oz teacher, but please look at what CPA was saying. Your views are totally subjective and I don't blame you for being angry...you have every right to be!!!! This is what CPA was alluding to when he/she referred to an objective test. We need to keep subjective opinions out of this.

I think we can safely say that Mt K took advice from no one. I am sure he did not consult with anyone when he decided to sell the building or mortgage his Gold Coast House or take a $2.95m loan in the name of Perth.

Those who made representations to third parties and they relied on these misrepresentations to their detriment may be held responsible. It is the rule of estoppel.

abandon any thoughts that there are "rules" in the business world, it's not Monolpoly.

Correction to this statement...there are rules and these are called laws, ethics and morality, terms foreign to Mr K and those around him who formulated corporate policy.

Tell Mr K it's not Monopoly....he wanted to control the entire board, be the only player. However, now that he has lost his 'Park Lane, Mayfair, Bond, and Regent Street' properties with others to follow, there is only one place left for him on the board...."Go directly to jail, do not pass GO, do not collect your 200"

Hope Mr K has his 'Get out of jail card!'

If I could just get in on a bit of this Monopoly action.....

Knowing Mr K's taste for the hookers I'm sure he had time to take a quick stop at Kings Cross Station before he went on round the board :) Maybe the only location he'll be able to afford to set up a school in the coming months will be Old Kent Road!

Damn I might even hit up Toys R Us today and get that game.

Yeah, point Mr K particularly to number 666 Old Kent Road....right up his alley!!! He might even get a discount if he asks nicely and mentions that he's a friend of the Aussie ESL teachers. Well, they'll certainly give him something.

Update:

GEOS Toronto and Montreal looking for Academic Coordinators...They never finished their year contracts.

GEOS Honolulu has a new manager.

GEOS Toronto manager gone last year.

GEOS NYC top manager not on the school page...Two campuses combined into one.

GEOS Calgary, folding?

GEOS Vancouver manager, who was with the company for 16 years! (since Vancouver started, left abruptly because of another GEOS manager.

Any word on the possible announcement?

Kid u not. This is a direct copy from the Ottawa web site.

"Words used to describe Ottawa and Ottawa GEOS: "International", "Entertaining", "Inviting", "Vibrant"... What words will you add? "

Ooooooooooh, the temptation.

GEOS Honolulu has a new manager.
Word is that the junior admin clerk who was based at Head Office is the new Manager? Is this a rumour?

If this is true, then let's add this school as neck and neck with Calgary!

Wait with baited breath for next weeks announcement.

How about this line in the NA websites...Wherever you wish to study, there's a good chance GEOS will be there!

Considering that GEOS Australia, NZ and Malta are no longer around and these are most popular destinations, this line should should be changed to read 'there's a slim chance that GEOS will be there!'

The longtime (12 years plus) General Manager of GEOS New York has left GEOS and is now listed as the Center Director at a GEOS competitor, EC New York:

http://www.ecenglish.com/Destinations/Learn-English-in-New-York

With the recent depature of the Operations Director based in Vancouver, it is not a good sign for the GEOS North American Schools.

Confirmed my suspicions about GEOS NY. GEOS manager who was on here providing excuses for GOES Vancouver and Toronto: where are you now? What is the excuse-of-the-day now?

The ex-GEOS manager, Michael, leaving without warning is HUGE! He was the main guy in North American, controlling everything. He left without warning and was obviously planning it under the table for a while since he could never be open about it without getting fired. He took an immediate director position at a competitor (that's gotta hurt) and is featured on the main page. Go, Mike!

So, recap...

GEOS NYC manager and NA head gone without warning...

GEOS Toronto manager gone last year...

GEOS Vancouver manager, with 16 years in, gone...

GEOS Honolulu manager suddenly departs (I think she was Japanese) and an admin guy with limited experience in her place...

ACs leaving early...

The ship is sinking and much faster than even I thought.

The manager in at GEOS Honolulu was Miwa Nishimura. She is even listed on the 2010 brochures for agents, so obviously not a planned departure. GEOS NA is silent about their main manager in NYC leaving...And to the main competition near Times Square. W

Hit this thread for updates on sudden departures, including the GEOS NA HEAD! He just bailed out of NYC and went to a competitor as the director!!!

http://www.letsjapan.org/shawn/2010/03/08/why-geos-melbourne-shut-its-do...

Same thread...You probably meant it for the other thread.

The spurious speculation and creative (?!) extrapolation from bare facts into "stories" and "reasons" on this site continue apace! The only thing missing from this gossip fest are soem hair curlurs, a platsic smock, a tiny dog with a bow on its head and the scent of fingernail polish. Some of facts are correct (others, laughably incorrect) but from winking "we all know what that means, eh wot?!" comments to pure fabrication of reasons and causes is, in a word, pretty shitty. There could be many reasons for staff changes, many reasons for promotions, many reasons for people being let go, many reasons for people leaving for other opportunities. Point is, you dont know why. Some of it may be regarding the company, some may be regarding a new opportunity or new business chance, some may be purly personal. Again, you dont know. The worst thing, however, is the naming of names. You have no clue as to the reasons these people changed their jobs, or had their jobs changed for them. And, I am sure, most of them dont appreciate being discussed by name in the "forum".

"There could be many reasons for staff changes, many reasons for promotions, many reasons for people being let go, many reasons for people leaving for other opportunities".

....er.... yes thicko.... GEOS is going down. Not rocket science my friend.

"Point is, you dont know why"

I think everyone does understand why people like ............ (omitted name just for you) jumped ship to one of the biggest competitors in NYC. Yes, it's a new opportunity as you say but he also realizes the game is up with GEOS and he doesn't want to be out of work in 3 months. Why do you bother to try to protect the brand when it is so doomed? Is it that difficult for you to find other work? I wish you all the best anyway.

Why do you bother to try to protect the brand when it is so doomed?

I dont work for GEOS and I couldnt give a crap about the brand. I just doubt that these people want their names discussed.

Reasons for managerial changes? Simple. The NA smarties have genned up on what is known as the "Australian Model."

MODEL INSTRUCTIONS
1.You are in the know, you see the future, you think about your holiday pay and your health insurance.
2. Do not communicate your worry to other staff.
3. You get outaaa there mumbling some excuse like "my granma in Milwaukee has an in-growing toe nail and needs personal care."
4. You remove any mention of GEOS from your biodata.

Some managers moving school does not a crisis make. Fact is, a lot of managers move on in ELT. It's a transient industry, opportunities come up and people find other things to do. There is not a single shred of evidence that I've read on this forum to suggest that GEOS NA will close up within, say, 3 months. Yes, they're downsizing but plenty of other companies do that too. I'm sure if you looked at any other competitor with the same diversity of schools as GEOS has in NA you'll be able to make the same case based on the same spurious line of reasoning.

And yes, I do think GEOS is probably screwed but 2 or 3 eikaiwa no-hopers trying to spin the faintest scrap of a rumour into an iron-clad conspiracy theory is just silly. If you're all as prescient as you think you are try using your miraculous powers of perception to predict your way into a better job.

Yohoho - relax and start planning for your next eikaiwa lesson.

Log back in on Friday when the NA press release should enlighten you somewhat.

What does 'prescient" mean? Is it a word that I should be teaching my Intermediates?

Yohoho and all his other postings...

It is obvious you have a vested interested in this matter...A) you are on this blog, b) you are blindly trying to defend GEOS, and c) you seem to desperate to control the ship.

As for the other poster (or same person?) who was worried about all the names being thrown around on here...Well, these are or were directors, who are the PUBLIC face of the company. They had/ have no problem. The fact that you just did not say "Hey, do not mention names specifically" but instead went into a long rant goes to show that maybe it has to do with certain names being thrown around and not all. Trying to protect that completely honed image (at least in your perception) that you worked so hard to craft online? Maybe more needs to be said...

Is Friday for sure in regards to the press release? I have hit up my sources, but I could not confirm it. Anyone with more info?

Will some or all of the GEOS NA schools close? Announcement this week?

With the Operating Manager for North America (!) suddenly leaving for a competitor, something is up. You do not just leave (by his choice) a job that you were in control of North American operations and all the glamor that goes with it unless something is up. Had it been planned, there would have been an announcement to agents and a proper transitioning...Instead, it was sudden and you saw the two GEOS NYC campuses merge into one without any renovations or expansion for extra students at the new one.

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