Isaiah Washington Apologizes & Shonda Sets It Straight

Grey's Anatomy actor Isaiah Washington has issued an apology in a statement exclusive to PEOPLE for his behavior during an on-set argument with costar Patrick Dempsey.

"I sincerely regret my actions and the unfortunate use of words during the recent incident on-set," Washington, 43, says in the statement. "Both are beneath my own personal standards. … I have nothing but respect for my coworkers … and have apologized personally to everyone involved."

After Washington and Dempsey, 40, clashed on Oct. 9, reports surfaced that Washington had used a homophobic slur during the fracas. Then on Oct. 19, their costar T.R. Knight disclosed to PEOPLE that he is gay. "I'd like to quiet any unnecessary rumors that may be out there," he said in a statement, adding, "I hope the fact that I'm gay isn't the most interesting part of me."

Fallout from the turmoil has sparked talk of everything from hasty script rewrites of an impending onscreen fight scene (not true, says show creator Shonda Rhimes) to rumors that Washington would be fired, possibly to be replaced by former ER star Eriq La Salle.

"I found (those rumors) not only ridiculous but offensive that we would consider replacing a member of our family," Rhimes tells PEOPLE. "And also the (idea) that one black man was interchangeable with another seemed disturbing to me."

Rhimes also dismisses speculation that the mood on the set has been unusually tense. "The mood's what the mood's always been," she says. "We have a group of people who are more of a family than anything else. We have our fun days, and we have our days when people are tired and the work is hard."

On Tuesday's episode of The Ellen DeGeneres Show, Grey's costar Katherine Heigl played down the incident, calling it "some scuffle … There was a little burst of testosterone in the room, and then within five minutes ... they were totally fine."

Washington was scheduled to tape an interview with DeGeneres on Tuesday to air Wednesday, but canceled – citing a scheduling conflict – after Heigl jokingly warned DeGeneres to "step back" during Washington's appearance, USA Today reports.

So what actually happened between Washington and Dempsey? A set source says that when Knight, 33, was late to film a scene, a debate ensued between Dempsey and Washington, with Dempsey insisting on waiting for Knight before starting the scene. The argument quickly intensified, and the source says that yes, the alleged slur was used, but Knight was not present at the time.

"Isaiah was running his mouth off," says the source. "Isaiah verbally attacked Patrick – he tore into him. Patrick's voice escalated and he did tell Isaiah to 'f– off, (but) that was as heated as Patrick got."

Today, Rhimes tells PEOPLE, Dempsey and Washington "are fine" – as are Washington and Knight. "They've had conversations," says Rhimes. "They did a really great scene together the other day." The whole affair, she says, "was four and a half seconds of one day in three years. I feel like we've already moved on."

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