Is it legal to with hold an employee's paycheck for failing to return their W4 and I9, when a written warning is given?

Why wouldn't you just return the forms?

Actually it was not really "legal" for them to hire you in the first place, the I9 is to be returned before you go to work,

And they can not process your paycheck, do the tax withholdings without the W4. So yes, they may hold your check till you return the forms.

They can not do a check for you till they have this information.