Mr. Nozomu Sahashi once built Japan's largest English-language chain. But the former president of Nova Corp. and one other former Nova official were arrested Tuesday on suspicion of misusing some ¥320 million deposited by employees into a welfare fund. Their arrests are expected to help unravel what brought the firm to bankruptcy and Mr. Sahashi's role in the process.
Nova opened its first English class in Shinsaibashi, Osaka, in September 1981. By April 2000 it had established branches in every prefecture, and boasted more than 1,000 branches in fiscal 2006. The chain had some 480,000 students across the nation at its peak in fiscal 2005 and at one point employed some 4,000 foreign instructors.
But starting in May 2003 the firm faced a series of lawsuits filed by students who had canceled their contracts and sought refunds of tuition fees. In April 2007 the Supreme Court upheld the requests. In June that year, the government ordered Nova to suspend some of its operations for allegedly lying to clients about tuition charges. In October that year, the firm sacked Mr. Sahashi and filed for corporate rehabilitation.