Judge orders Costco to pay $507,901 in sex-harassment suit

Costco Wholesale was ordered to pay a $507,901 judgment after losing a sexual-harassment lawsuit this week.

The victim, Katina Perry, claimed Costco optical-laboratory employee Greg Smith had a long history of making disgusting comments and gestures to his female colleagues, and on one occasion exposed himself to Perry. Nonetheless, the Issaquah-based company failed to end the harassment, King County Superior Court Judge Dean Lum ruled Wednesday.

In fact, the judge said, after the exposure incident, Smith was given what could be considered a promotion, while Perry was "hung out to dry, left to twist slowly in the wind."

"Costco's actions did not deter Mr. Smith from continuing his harassment ... did not prevent Mr. Smith from attempting to intimidate Ms. Perry, did not prevent Mr. Smith from continuing to stalk Ms. Perry and did not prevent Mr. Smith from engaging in further acts of sexual harassment towards other women," Lum wrote.

According to Lum's findings, Smith frequently boasted of his sexual prowess, leered and made suggestive noises and gestures with his tongue, among other offensive behaviors.

Once, as Smith and Perry were getting off work at 4 a.m., he exposed himself from the waist down, according to the findings. Shortly after that incident, in early 2000, Perry reported Smith to management. An investigation turned up several other employees who complained about Smith's harassment, and a supervisor told corporate administrators that Smith should be terminated. "He seems to have done this for quite a while and gotten away with it," the memo stated.

Rejecting that recommendation, Costco Vice President John Osterhaus decided there was "no real proof" of the incident. Smith denied the accusations and kept his job. He was suspended for three days, sent to sensitivity training and transferred to the day shift — an assignment that could be considered a promotion, Lum said, noting he couldn't understand how Osterhaus could have believed Smith.

"At trial, Greg Smith was not credible at all. His demeanor was terrible and his testimony was not worthy of belief in any way," the judge wrote.

Neither Costco CEO James Sinegal nor corporate counsel Bruce Coffey returned a reporter's phone calls.