Video Update Deal On Hold During Audit

ST. PAUL, MN-Movie Gallery has had to put on hold its plans to buy St. Paul-based Video Update as it awaits a three-year audit report on the company. The Alabama-based video rental chain told federal bankruptcy court officials they could not complete their acquisition of troubled Video Update until the auditors, Deloitte & Touche, released their financial report on the video rental chain.

Deloitte & Touche is investigating contentions made by a recent preliminary report done for an unsecured creditors committee that alleges evidence of wrongdoing by former Video Update managers, including misuse of expense accounts. Movie Gallery says delaying the court hearing was necessary so Deloitte & Touche or any other auditors can investigate the allegations.

If the deal still goes through, Video Update would become a subsidiary of Dothan, AL-based Movie Gallery, with about 330 stores.