FBI Raids PolyMedica Subsidiary's Offices; Stock's Trading Halted

Updated from 2:39 p.m. EDT

While scores of FBI agents were raiding the offices of PolyMedica (PLMD Quote - Cramer on PLMD - Stock Picks) subsidiary Liberty Medical Supply today, agents also raided the homes of two Liberty executives.

Sources said agents armed with search warrants descended on the home of George Narr, chief information officer of PolyMedica, who was recently promoted to that position, and the home of Jan Vallas, operations vice president.

In all, some 85 FBI agents took part in the raids, according to spokeswoman Judy Orihuela of the bureau's Miami office.

As previously reported, the company has been the focus of an FBI criminal investigation for months. The FBI inquiry began after officials in the U.S. Department of Health and Human Services raised questions about whether Liberty Medical was improperly billing Medicare for products that were returned, never ordered or never shipped to customers. Liberty Medical, a leading mail-order supplier of diabetes test equipment, is responsible for about 80% of PolyMedica's revenue.

People who were in the Liberty Medical offices in Port St. Lucie at the time told my associate, Mark Martinez, that shortly after 1 p.m. EDT, employees were told via the company's public address system to back away from their desks, leave their computers on and go home. All three Liberty offices were closed, including the company's warehouse in Palm City, Fla. The offices and warehouse are located about 100 miles north of Miami.

Vallas, according to our sources, tried to leave the company in her car after the raid but was stopped by FBI agents.

At 1:44 p.m. EDT, soon after the raid, which was first reported on RealMoney.com and TheStreet.com, the trading of PolyMedica's stock was halted by Nasdaq. It's unclear when the stock will reopen.

Asked how long it will take for the FBI to conduct its search, spokeswoman Orihuela said: "We are planning on going through the night -- up 'til midnight. And if we are not through by then, then we will resume the search in the morning."

Officials at PolyMedica, based in Woburn, Mass., haven't returned our calls, but CEO Steven Lee told CNBC's Tom Costello today, "I have no idea what they're looking for. We don't even know what the investigation is about."

Three weeks ago, Lee told investors on the company's earnings conference call that a long-running investigation by the FBI was civil in nature, not criminal -- despite several reports here to the contrary. The company subsequently acknowledged the investigation was criminal.