A former employee alleged he masturbated in front of her, with the actor and producer deciding to come forward himself with the claims - because his children, Dylan, 18, and Carys, 15 - feared he would be labelled a sexual predator.
Speaking about the allegations, Catherine told the Sunday Times Magazine:"My children and I were profoundly devastated by those allegations. And I was torn about where my absolute morals lie.
"This woman came out of nowhere and accused my husband. I had a very big conversation with him, with the kids in the room, and said, 'Do you understand if more comes out…'"
Explaining how Michael had reassured the family about the claims, she said: "By telling us that there is no story here and that time will tell. And, of course, it did. There was nothing to back it up at all. For any accusation that comes out that isn't backed up, that knocks the movement back 20 years."
In January, Michael decided to come forward himself with the allegations, after being approached by the Hollywood Reporter.
The Wall Street star revealed he was approached about the allegations just before Christmas - and on the same day his son Dylan was accepted to college.
He told Deadline: "When we were all ecstatic... (then) I got a message from my attorney that The Hollywood Reporter wanted to do a story about an employee that worked for me approximately 32 years ago".
Michael said the allegations that he masturbated in front of her was a 'complete lie'.
He added that his family had been left with the consequence of embarrassment and shame following the claims.
"The part that hurt the worst is having to share something like this to your wife and your children," he said.
'My kids are really upset... have to go to school worrying this is going to be in some article about me, being a sexual harasser. They're scared and very uncomfortable.'
