The Securities and Exchange Commission (SEC) has filed suit against a Bainbridge Island company and a related high-profile Seattle company alleging the two firms bilked investors of more than $79 million. The lawsuit is the culmination of the largest stock fraud investigation in the state’s history.

Bainbridge Island-based Health Maintenance Centers (HMC), which owns the Human Performance Center in Winslow, and Seattle-based Znetix Inc. are accused of defruading more than 5,000 investors, including a number of Puget Sound church congregations.

The SEC was initially granted a temporary restraining order that froze the company’s assets and prevented them from destroying documents. It expired on Jan. 31 when another court hearing was set to hear additional details of the case. The SEC was expected to ask at that time for the order be extended until the case is resolved.

The suit names HMC and Znetix founder Kevin L. Lawrence, a Bainbridge Island resident; HMC Treasurer Donovan C. Claflin; Scottsdale, Ariz.. resident Clifford G. Baird; Cascade Pointe of Arizona and Cascade Pointe of Nevis as defendents.

Instead of taking the company public as promised, the SEC’s lawsuit alleges the principals used investors’ money to buy lavish homes, jewelry and cars. The SEC halted trading of the firms’ stock on April 9 of last year.

Lawrence is accused of going on a $14 million shopping spree that included spending $2 million on homes, $1 million on boats, buying 23 cars, and jewelry that included a $330,000 engagement ring.

The suit also alleges Claflin misappropriated $2 million of investors money for personal use as well.

The lawsuit notes that the pair invoked their Fifth Amendment right against self-incrimination when the SEC questioned them.

Investors were told the companies intended to create a new generation of medical facilities that would combine fitness clubs with preventative care and medicine. Znetix would acquire HMC, and do an initial public offering of $3 to $60 per share.

Znetix sponsored a modestly successful unlimited hydroplane team that has been a local favorite at Seafair the past couple of years as well as advertising at Safeco Field as a way to reach potential investors. It also persuaded Los Angeles Lakers star Shaquille O’Neal to wear a Znetix baseball cap on TV after his team won the NBA championship last year.

Deborah Bortner, state securities administrator, told the Seattle Post-Intelligencer, “It’s a huge case and hard to get your arms around.”

Znetix and Bainbridge HPC have been the most searched names in the Kitsap Business Journal’s Website database for the past year and a half, as investors sought information on the company.

Attempts to reach Lawrence, Claflin and Baird for comments on this story were unsuccessful at press time.