Police targeting ex-Nova president

OSAKA--Police are investigating the former president of the now-bankrupt language school chain Nova Corp. for possible breach of trust over a project that brought profits to an affiliate he controlled, sources said.

Sahashi

Nozomu Sahashi, 56, is suspected of having paid exorbitant prices for a server used in video-phone hookups for language lessons, sources said.

Police suspect he used his position to reap profits for his affiliated company, although the deal resulted in about a 500-million-yen loss to Nova, the sources said.

Investigators are trying to determine if Sahashi can be held for aggravated breach of trust stipulated under the corporate law, they said.

Osaka-based Nova filed for bankruptcy protection in October 2007. A number of businesses have since taken over some of the schools formerly operated by Nova or taken in its former students.

The affiliate in question is Tokyo-based Ginganet Corp., whose accounts were kept separately from those of Nova.

Sahashi and another Nova affiliate funded by Sahashi held all the stocks in Ginganet.

Ginganet's board members were dismissed after Nova's bankruptcy. One of Nova's bankruptcy administrators, Toshiaki Higashibata, now serves as the Ginganet president.

In 2001, Nova started full operations of the video-phone service in which students take language lessons at home via the hookup.

Ginganet developed the special TV-phone sets used for the lessons and sold the system to Nova. In addition, Nova used the Ginganet-managed server for the video-phone lessons and paid for the use of the server.

But sources close to the project have said the amount paid to Ginganet was unjustifiably high compared with similar systems.

After cost comparisons, Osaka prefectural police determined that Ginganet had illicitly received around 500 million yen in profits from Nova for the use of the server, the sources said.

The bankruptcy administrator had also earlier noted that the price of the TV-telephone devices Ginganet charged Nova was unreasonably high, which could have resulted in Nova losing several billion yen.

Sahashi's lawyer said profits from the TV-telephone sets did not amount to much. The lawyer also said the actual profits are even smaller if developmental costs of the whole system are taken into account.(IHT/Asahi: February 13,2008)