In March 1989, Marshall B. Coyne, owner of the Madison Hotel, called the luxury hotel's top manager into his office and fired him.

Coyne has said in a deposition that he fired Winston Wlodawsky because an investigation uncovered evidence that Wlodawsky was having an affair with a female subordinate. Coyne's management of his own manager is a central issue in a lawsuit brought by former employees of the Madison, who have accused Wlodawsky of numerous instances of sexual harassment. In the view of the former employees, Wlodawsky should have been fired long before.

For nearly a year, Wlodawsky had been sexually harassing female employees of the Madison, according to a lawsuit that was scheduled to go to trial today in the federal courtroom of U.S. District Judge Harold H. Greene. But instead of firing Wlodawsky, the 79-year-old Coyne fired the women who complained, according to the suit. Coyne and Wlodawsky have denied the allegations.

The plaintiffs settled their suit against Coyne and the Madison late Friday. Attorneys for the parties declined to comment on the terms of the confidential settlement. However, attorneys for plaintiffs said they were "perfectly satisfied" with the settlement, which must be approved by the court today.

Settlement talks were continuing last night between attorneys for Wlodawsky and the plaintiffs. Wlodawsky's trial is scheduled to begin this morning if no settlement is reached.

Wlodawsky worked at the Madison from November 1987 to March 1989. The complaints allege he exposed himself to a hotel telephone operator and invited an employee to join him for dirty movies and drinks in a Madison hotel room.

The lawsuit, which sought $13 million in damages from Coyne, Wlodawsky and the Madison, alleged that Coyne contributed to an atmosphere of sexual harassment by failing to discipline Wlodawsky after complaints by female employees, by unfairly firing a female employee who complained and by making sexist remarks.

In depositions taken as part of the legal proceedings, Coyne said that he hired the Arent, Fox, Kintner, Plotkin & Kahn law firm to investigate complaints about Wlodawsky and that the law firm's probe was inconclusive.

Employers have said in interviews that one of the problems in sorting out allegations of sexual harassment is that the conduct in question may often involve comments and innuendos rather than overt action.

Often it is one person's word against another's. What, they ask, is an employer to do when a top manager, accused of sexually explicit misconduct, denies the allegations? What should an employer do if there is no conclusive proof of improper conduct but the complaints about sexual harassment continue?

A 1985 Supreme Court case, Meritor Savings Bank v. Vinson, held that employers are responsible for the atmosphere of the workplace and for the actions of their employees.

In recent years, many employers have taken steps to combat sexual harassment and to protect themselves against legal charges by issuing written policies and training employees and supervisors to recognize and report harassment.

When asked in a deposition whether the Madison Hotel has a policy with regard to sexual harassment, Coyne answered: "We have now."

Coyne spoke to a reporter only briefly before the case was settled, and his attorneys declined to comment. The Madison owner could not be reached for comment after the settlement.

By his own account, Coyne is worth about $100 million. In addition to the Madison Hotel, Coyne owns the Marshall B. Coyne Building at 15th and M streets NW, the Madison Office Building adjoining the hotel, numerous other area properties and interests in an oil and gas drilling business.

Lisa Newell, an attorney for three of the plaintiffs, said the amount of money the plaintiffs asked for might seem high, but that was necessary to truly punish the defendants for their behavior.

"If there was ever a case for punitive damages, this would be it, both in terms of the seriousness of the actions and to serve the purpose of making these guys pay attention," said Newell.

"We're not worried about Mr. Coyne being unable to pay," she said.

In a memorandum rejecting Coyne's motion to dismiss the lawsuits, Judge Greene said that, if the allegations are true, "Wlodawsky's conduct was beyond the bounds of decency and of a civilized society."

Greene added, "The allegations in the complaint, which must be taken as true for purposes of a motion to dismiss, provide ample basis for a finding that the Coyne defendants had reason to know of the harassment and that they were negligent in not discovering and preventing it."

The incident Greene referred to as potentially the most serious occurred in June 1988, when Wlodawsky allegedly entered the office where Renate Bottalico, a telephone operator at the Madison Hotel, was working.

Wlodawsky walked over to plaintiff Bottalico, put his hand on her shoulder and started rubbing against her, according to Bottalico's complaint. Wlodawsky allegedly exposed himself, then pulled his pants down and tried to take her pants off, too, the complaint said. She said that Wlodawsky stopped when a co-worker knocked on the locked office door to enter.

Wlodawsky's attorney, Richard Huber, said, "He didn't do it. It's total poppycock."

Wlodawsky's wife, Filomena Wlodawsky, said, "My husband is a decent person. This is a rotten lie."

Filomena Wlodawsky said in an interview that her husband had been deserted by his former boss. "Coyne told him, 'Don't worry about it' ... ." She added, "It's not true, not possible. He is a dedicated husband and father." Wlodawsky did not return a reporter's phone calls.

The Bottalico incident resulted in Wlodawsky's arrest following the filing of a criminal complaint of sexual assault against him in June 1988. The case did not go to trial.

Coyne's attorneys at Arent, Fox represented Wlodawsky in the criminal matter and advised him to enter a pretrial "diversion" program, which he did in September 1988. Participation in the program does not imply an admission of guilt. As part of the program, Wlodawsky agreed to undergo psychological counseling and perform community service rather than go to trial.

Coyne paid Wlodawsky's legal fees in the matter. When Wlodawsky told Coyne about the allegations that he exposed himself, Coyne "thought it was funny," Wlodawsky said in a deposition. "He responded with ... a slight giggle."

According to Wlodawsky's deposition, Coyne told him to " 'calm down. You're too nervous. I'm handling it. We'll take care of it. It'll all be over soon.' ... On occasion, he would make a comment in a friendly fashion, 'you ought to keep your hands in your pockets.' " Wlodawsky said he told Coyne he wished he wouldn't make that comment because he found it offensive.

Coyne said in a deposition he never talked with Bottalico about the matter, and believed Wlodawsky when he denied that the incident occurred.

Although he said he didn't believe it at the time, Coyne said he came to believe later that Wlodawsky may have exposed himself. "It is possible he could have. ... My opinion today is that I think he is capable of it," Coyne said.

Coyne said that the allegations of sexual harassment against Wlodawsky had nothing to do with his firing nine months later. He fired him, Coyne said, because when confronted with evidence that Wlodawsky was carrying on an affair with a subordinate, Wlodawsky lied.

"I fired him because he lied, cold, cold lie," Coyne said in a deposition.

In court papers, Wlodawsky has said he was having an affair with a woman who worked for him.

After the alleged incident, Bottalico took a leave for health reasons, was often afraid to go to work, had trouble sleeping and her engagement broke off, she said in a deposition. She sought and received medical treatment.

The discrimination and harassment lawsuits against Coyne and Wlodawsky allege that Wlodawsky began rubbing up against women in the telephone operators' room, touching them inappropriately and looking down their blouses several months before he allegedly exposed himself to Bottalico. The plaintiffs testified they talked among themselves about the incidents but did not report them because Wlodawsky was the boss and they were afraid of losing their jobs.

In early 1988, according to the lawsuits, Wlodawsky invited Ingrid Davis, a catering secretary, to a hotel room to "watch dirty movies and drink schnapps." She declined and reported the behavior to her supervisor, Julia Carroll, who then reported to Coyne, he said.

According to court papers, Renee Immesghen, Bottalico's supervisor, told Coyne in June 1988 that Wlodawsky allegedly exposed himself to Bottalico in the telephone operators' room. Four days later, Coyne called Immesghen to his office and asked her why she was accusing Wlodawsky, saying there was no proof. The following week, Coyne fired her. In his deposition, he said she exercised poor judgment by talking about the matter too much.

After Carroll's report to Coyne, Carroll said Wlodawsky told her to start writing up "each and everything {Davis} did wrong on the job" to justify her dismissal.

Wlodawsky said in a deposition the incident didn't happen the way Davis described it -- he merely asked Davis whether some schnapps had been ordered for the liquor inventory. Coyne never investigated the allegation made by Davis, according to depositions by Wlodawsky and Coyne. Eleven days after the incident, Davis was laid off.

Another plaintiff in the case is Margaret W. Rauh (daughter-in-law of civil rights attorney Joseph L. Rauh Jr.), who was hired by Coyne as vice president of marketing at the Madison in September 1986. Rauh alleged in her complaint that Coyne discriminated against her on the basis of her sex and marital status.

Rauh alleged in her complaint that Coyne frequently referred to female employees as "bimbos," "little girls" and "sorority sisters," according to court papers. Coyne said in a deposition that he may have used the term sorority sisters. When asked in a telephone interview whether -- as Rauh contends -- he is a sexist, Coyne replied: "I'm certainly not."

According to papers filed by Rauh's attorneys, Coyne fired Rauh in April 1987, after beginning a renovation of the Madison that would involve millions of dollars and telling her that "only men should handle money." Coyne insisted that since Rauh's husband was a successful lawyer, she didn't need to work. After firing Rauh, Coyne allegedly tried to get her to resign and kissed her on her hands and face.

According to Coyne's deposition, Rauh was fired because she had no marketing plan. In addition, she refused to move her office to a spot where she could watch the telephone operators. Coyne also said that Rauh was reluctant to fire a number of people he had asked her to fire. "She lacked the leadership of doing it," he said.

David Shapiro, Rauh's attorney, said that Coyne believes that because it's his hotel and his money, he decides. "This was the kind of sex discrimination that just doesn't happen in big companies anymore because people know better. But Mr. Coyne doesn't," Shapiro contended.