Quotes of the Day

When Natasha Steele arrived in Japan from her native Australia earlier this year, the 26-year-old was looking forward to immersing herself in a foreign culture while preparing for a teaching career back home. She had joined Nova, Japan's largest chain of English-language schools, through its Sydney recruiting office, and was enjoying teaching her class full of rowdy kids. But in one of Japan's highest-profile corporate collapses in years, Nova announced on Oct. 26 that it would shutter its classrooms, locking out some 300,000 students and leaving 4,000 foreign teachers jobless, threatened with eviction and rapidly running out of money. "I got kicked out from the apartment I was renting through Nova, and am living off my savings," Steele says. "The school lied to us, left us devastated."

Nova, started by CEO Nozomu Sahashi in 1981, grew into a publicly listed chain with over 900 locations at its peak, dominating Japan's $1.7 billion foreign-language-education industry through discount lesson offers and a sassy, ubiquitous ad campaign. In 2006, as many as two-thirds of Japan's foreign-language students were enrolled at Nova. But things started to unravel for the company in April, after the Supreme Court ruled that its prepaid tuition scheme, under which students bought thousands of dollars in lessons up front and received only partial refunds in the event of cancellations, was illegal. A subsequent government investigation unearthed more dodgy business practices at Nova, including false advertising and contract violations, and led to a partial suspension of its operations — at which point hundreds of thousands of students demanded their money back. The result was the equivalent of a bank run: as students rushed to close their accounts, the company fell some $380 million into debt. Nova then filed for bankruptcy protection, making it impossible for students and teachers to collect their tuition refunds and unpaid wages.

The closure has left teachers suddenly adrift in a strange land. Many, like Steele, have taken to the streets, leading demonstrations against Nova and Sahashi and holding press conferences denouncing the company. On Nov. 2 former Nova employees announced a lessons-for-food program, which would allow students to pay for classes in meals and groceries. Meanwhile, some airlines have offered discount flights home for cash-strapped teachers, while embassies have opened hot lines to aid their stranded citizens. The out-of-work teachers have glutted the local labor market, causing other schools to stop accepting job applications. "The market is already saturated, and many schools have had to slash prices as enrollment steadily declines," says Susumu Ikegami, a spokesperson for GEOS, the country's second largest English institute. "We worry about loss of consumer confidence in the industry as a whole."

The troubles for Nova don't end there. Court-appointed lawyers investigating the case allege that Sahashi, who has been fired by the board and hasn't been seen in public since June, had turned his company into something of a personal piggy bank; they accuse him of misappropriation and aggravated breach of trust. (Sahashi's representative has filed a petition rebutting these allegations.) On Oct. 30, the lawyers invited reporters to check out Sahashi's lavish office at the company's Osaka headquarters, complete with a fully stocked wet bar and a hidden bedroom and sauna. "I wanted to show the extent of his misdeeds," said attorney Toshiaki Higashibata, who organized the event.

On Nov. 6, G.education, a Nagoya-based English-tuition chain, threw Nova a lifeline, agreeing to take over its operations. But it only plans to reopen some 200 of Nova's 669 remaining schools, and it won't be refunding fees, although some rival institutes are offering discounts for Nova students. That won't help former teachers like Kristen Moon, a 23-year-old English-education major from Philadelphia, who has been scraping by on private lessons she now gives to her former Nova students. "I'm living hand to mouth," she says. "Nova has ruined a lot of people's lives."

• Toko Sekiguchi/Tokyo