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updated 4/24/2011 1:07:27 PM ET 2011-04-24T17:07:27

When federal agents seized 950 marijuana plants from the Montana Cannabis warehouse last month in raids on medical pot businesses across the state, business co-owner Christopher Williams vowed to reopen by the end of the week.

It never happened. Williams now says more than half of his patients have left for other providers, his bank accounts have been frozen and he is living in a camper. The warehouse outside of Helena has a "For Rent" sign outside and he is looking for a lawyer to take his case for free.

"We haven't been able to bounce back. I'm going to end up shutting my business down and filing for bankruptcy," Williams said. "This isn't just a raid against crack dealers on the streets of New York. This raid has actually destroyed a lot of families."

The March 14 raids have placed a chill over the once-booming industry in Montana. Chuck Watson, a Bozeman attorney representing one of the medical marijuana businesses that was raided, estimated 25 percent of the state's providers have shut down or suspended operations since the raids. Other providers — called caregivers in Montana — have closed their doors and will only deliver to patients.

Story: A medical pot business is like any other, except for ...

"Everybody is completely on edge. These people are just sitting around, waiting for a knock on the door," Watson said. "There were a lot of people who walked away from million-dollar investments around here because they didn't want to go to jail."

The Healing Center, which provides marijuana to between 150 and 200 patients in around Bozeman, was not a target in the raids. But owner Michael Smith said he has shut down his storefront operation and his business is now delivery

"The storefront model is what they're looking at," Smith said. "They're going to let some things go, but if you do too much, they're going to smack you down."

In addition to the federal investigation, legislation to revamp the state's medical pot law is expected to be approved by Montana lawmakers next week. It would create a much stricter atmosphere for the industry by tightening eligibility for users and prohibiting marijuana providers from making a profit.

The uncertainty has left medical marijuana users wondering what's coming next. Some who lost their caregivers after the raids have found other providers, a transaction that must be registered with the state.

But others have held back from switching or renewing their cards because they don't want to leave a record with the state. They are fearful they may be targeted as criminals if the state law changes or if federal prosecutors decide to go after them.

A Bozeman patient said he won't register with the state for just that reason and is buying marijuana from street dealers instead. The man spoke on the condition of anonymity because he is buying pot illegally.

"This is scary more than anything. You go from being a normal person to being a criminal," the patient said. "But if I get it from a kid on the corner, it's less likely for me to get in trouble buying it that way."

Twenty-six search warrants were executed on March 14 by the FBI, Drug Enforcement Agency, Bureau of Alcohol, Tobacco and Firearms and other federal agencies with the help of state and local law enforcement.

More than 2,880 marijuana plants and 258 kilograms of bulk and loose pot were seized, along with hundreds of unweighed containers of marijuana, hashish and food products that contain drugs, according to inventories filed with U.S. District Court in Missoula.

Also taken: 35 rifles and handguns, $37,193 in cash, five vehicles, a ski boat, computers, cell phones and cameras. Agents were authorized to seize up to $4.2 million from bank accounts in Kalispell, Helena and Belgrade, but the inventories did not include an amount actually taken.

U.S. Attorney Michael Cotter of the District of Montana has said the raids were part of an 18-month investigation into drug trafficking. No charges have been filed.

The raids also appear to be part of a larger U.S. Department of Justice crackdown on medical marijuana providers in the 15 states and the District of Columbia where it is legal. Last week, Cotter sent a letter to Montana legislative leaders that said the Department of Justice would enforce the federal Controlled Substances Act "against individuals and organizations that participate in manufacturing and distribution activity involving marijuana, even if such activities are permitted under state law."

That letter echoes a memo issued in February by Melinda Haag, the U.S. Attorney for the Northern District of California, that said the "government may also pursue civil injunctions, and the forfeiture of drug proceeds, property traceable to such proceeds and property used to facilitate drug violations."

Both Cotter's and Haag's letters said the government won't focus its resources on "seriously ill individuals who use marijuana as part of a medically recommended treatment regimen consistent with state law."

That's been policy since October 2009, when Deputy Attorney General David Ogden wrote the federal government would not pursue prosecution of such individuals who are in "clear and unambiguous" compliance with state law.

That policy has led to the boom in Montana, which approved medical marijuana use in a 2004 voter initiative. Critics say the law has loopholes that allow users beyond the most seriously ill patients for whom it was intended.

A month before Ogden's memo, there were 3,921 registered medical marijuana users in the state. As of this March, that number had jumped to 29,948. There was also a jump in caregivers, from 1,403 in September 2009 to 4,848 by the end of March, dozens of which provide pot to more than 100 patients apiece, resemble retailers and even advertise.

Legislators who support the pending legislation say the measure would reduce the ability for caregivers to grow into such large, unregulated businesses. Opponents of the measure say it would force patients and caregivers to buy and sell marijuana on the black market.

That's an option Williams, the co-owner of the now-defunct Montana Cannabis, is weighing. Williams is tending to a new crop of marijuana plants that are about two months away from harvest.

He doesn't plan to re-open his business but said he may go underground.

"I don't know that I'll operate within Montana's medical marijuana system," Williams said. "I won't start a company again. I'll never pay taxes again."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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