A federal lawsuit against island health club entrepreneur Kevin Lawrence will be put on hold until possible criminal proceedings are resolved.

Federal Judge Marsha Pechman this week approved a stay in the civil lawsuit filed against Lawrence, his companies and other principals by the federal Securities and Exchange Commission.

Pechman also rejected Lawrence’s claim that he should be allowed a free-wheeling civil discovery to defend himself against the suit – filed to stop an alleged $91 million securities fraud – and possible indictments.

In seeking a stay in its civil case, the United States Attorneys’ Office said criminal investigations are ongoing, and that indictments are expected by the end of the year.

Under the rules applicable to the SEC’s civil suit, the government was required to disclose virtually everything it had uncovered in its investigation of Lawrence’s operations. Loath to reveal such details as the names of witnesses, the government had moved to set aside the action until the criminal investigation is resolved.

Lawrence would still be entitled to the limited discovery available to defendants in criminal cases, but he opposed the motion, arguing that if the government was going to bring both a civil and a criminal claim against him, he should be entitled to the broadest possible inquiry.

Pechman rejected his claim.

“The government is an interested party with a strong interest in preventing the defendant from circumventing the limited discovery available in criminal proceedings,” she wrote in her order granting the stay.

Lawrence, Donovan Claflin of Redmond and companies they founded – Bainbridge-based Health Maintenance Centers and Znetix, and entities called Cascade Pointe in Arizona and the Caribbean island of Nevis – were sued by the SEC earlier this year.

Regulators say the companies sold $91 million in unregistered securities to thousands of investors around the country, charges that Lawrence did not contest.

According to the SEC complaint, Lawrence and others touted the Madison Avenue health club formerly operated by HMC as a prototype of an integrated health-care facility that would combine fitness and medical care.

Lawrence and others sold stock in HMC at $1 per share, with the promise that Znetix would buy out HMC by swapping multiple shares of Znetix stock for each share of HMC stock.

Znetix would “go public,” investors were allegedly told, making each share of Znetix stock worth as much as $60.

But the companies had no ongoing operations other than the Bainbridge gym, which ran at a significant loss. In February, Pechman shut down the operations by granting an injunction preventing further stock sales or the spending of additional money.

She appointed a receiver to locate assets and, under court supervision and approval, devise a plan for their distribution.

After a six-week shutdown, the gym has reopened as Island Health and Fitness, a company that has no relationship to Lawrence or the other defendants.

Meanwhile, receiver Michael Grassmueck has recovered some assets from Stacy Gray, Kevin Lawrence’s fiancee.

According to records on file in Seattle federal court, Gray turned over three cars, including a 1999 Ferrari CV valued at an estimated $185,000 that Lawrence bought her as a gift.

She also handed over a $300,000 diamond ring, another $100,000 diamond ring with a matching necklace of unspecified value, earrings, a bracelet and a $40,000 Cartier watch.

Gray also surrendered both 2000 and 2001 model-year boats with trailers.

Gray, along with Lawrence’s mother and sister, are named in the SEC action as “relief defendants” – people who the SEC does not claim violated any laws, but who may have benefitted from the alleged violations of others.

Gray admitted that much or all of the money to buy the items she turned over came from either HMC or Lawrence.

The receiver is also trying to hold off attorneys for several investors who have already obtained court judgments against some of those allegedly involved in the stock sales, and who want to collect.

Judge Pechman’s February order barred further lawsuits against HMC and Znetix.

Grassmueck has asked her to extend that ban to include Lawrence, the “relief defendants” and all officers and directors of HMC and Znetix, arguing that whatever assets they might have to satisfy any judgments should become part of the receivership estate, to be distributed according to an equitable plan rather than according to who won “the race to the courthouse.”

Judge Pechman has not yet ruled on the motion to expand the number of persons included within the lawsuit bar.