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Feds Raid WebMD Offices

Trading was halted in shares of WebMD Corporation Wednesday as federal officials searched the health services software company's offices as part of an investigation by the Department of Justice.

The NASDAQ exchange said it won't resume trades of WebMD shares until its "request for information" has been satisfied.

In a statement, the Elmwood Park, N.J.-based WebMD said the investigation was focused on the company's dealer acquisition program within its physician services segment, called WebMD Medical Manager, as well as on its $5.5 million financial restatement from 1999.

WebMD said in a statement that it believes the search warrant was based on "misleading information from two terminated employees who WebMD has sued for taking improper kickbacks. The company believes that it has not violated any laws."

In addition, it said it intends to fully cooperate with the authorities in the investigation and does not expect any impact on its operations.

A company spokesperson was not immediately available for comment.

However, the Web site of a Gainseville, Florida television station, WCJB.com, reported Wednesday that FBI and IRS agents had served a search warrant at the offices of Medical Manager in Alachua. WebMD purchased the company in 2000 in an all-stock acquisition valued at $4.99 billion.

The report also said simultaneous raids were conducted at other medical manager facilities owned by WebMD.

In a research note issued Wednesday, Deutsche Bank Securities put a hold on the stock and said it believes the price, which was at $10.20 when the last trade was made just before 11:00 am, was likely to fall when trading resumed -- which could create a buying opportunity. The investment bank stuck with its neutral outlook for the company.

But when the stock resumes trading is still a question. Later Wednesday, the NASDAQ put out a notice saying that the trading halt status it issued on WebMD that morning was changed to "additional information requested" from the company. Further trading will remain halted until WebMD has fully satisfied Nasdaq's request for additional information, the exchange said.