The match referee, Raman Subba Row, fined McGrath 30 per cent of his match fee and severely reprimanded him for bringing the game into disrepute for spitting on the pitch at the end of the fourth day's play of the final Test in Antigua.
Australia squared the series 2-2 by bowling out the hosts for 211 for a 176-run victory on Wednesday despite a defiant stand by opener Adrian Griffith.
Griffith, forced to retire for a time on Tuesday after being struck on the elbow by paceman McGrath, was the only batsman to show the necessary determination before he was ninth out, having scored 56.
West Indies, facing a huge victory target of 388, never looked capable of withstanding the Australian attack and the visitors retained the Frank Worrell trophy they won by beating West Indies on their previous tour four years ago.
But the outcome of a thrilling Test match was overshadowed by the McGrath row which Waugh believes the West Indies captain handled badly. He feels Lara should have vented his feelings to the West Indies manager, Clive Lloyd, instead of confronting the umpire David Orchard.
"It was definitely handled the wrong way, there's no doubt about that," Waugh said. "It should have gone through the right channels. If you've got a complaint you make it via your manager to the match referee."
McGrath was cleared of aiming it at Griffith, as had been alleged by the West Indian team. "I know Glenn and there's no way he would have spat at him," Waugh said. "He got charged with spitting in the vicinity of a batsman and on the wicket. He didn't get charged with spitting at the batsman.
"It was unfortunate. It got replayed a few times from a few different angles and it's always going to be a big story." Asked about the spitting incident, Lara said: "There's no love lost. The match referee handled that and it's in the past now."
The last Australian to be accused of spitting at a batsman was Merv Hughes during a clash with Mark Greatbatch on Australia's 1993 tour of New Zealand. The match referee, Javed Burki, took no action then because the camera angles were inconclusive.
When Waugh lifted the Frank Worrell Trophy he compared its significance - supremacy over the West Indies - to that of the Ashes contests against old rival England.
"I think it's pretty much equal. The Ashes has got a tremendous tradition. So has the Frank Worrell Trophy now," Waugh said.
"For us we were desperate to win this. It meant a lot to the players. The younger guys were pretty keen to retain the trophy and make sure it went back with us on the plane. We're going to celebrate with it tonight. You know you have to pass that tradition on to the younger guys and let them know it's a special thing to win."
The 33-year-old Waugh was winning his first Test series as captain, replacing Mark Taylor after the latter's 3-1 victory reclaimed the Ashes in January.
Waugh paid tribute to McGrath, who took a series-high 30 wickets in four tests. "He's been doing it for a couple of years now," Waugh said. "But he is getting better with every game.
"He just doesn't bowl any loose balls. He loves bowling and you can't get the ball out of his hand. Even if he's injured or tired, he won't say anything, he wants to keep bowling. He's great for a captain."
Lara, who scored 213 and an unbeaten 153 in his team's two victories at Jamaica and Barbados, also lauded the fast bowler.
"McGrath's performance throughout the series was something to behold," Lara said. "I thought it was a tremendous effort. He's a great competitor and someone who all young bowlers should try to follow."
Lara earned the Man of the Series award just ahead of McGrath. The 29- year-old left-hander added his third century in successive Tests at Antigua off just 82 balls and ended with 546 runs at an average of 91.
"It was a tremendous series and deserved to be drawn 2-2," Lara said. "After what happened in South Africa [the West Indies lost 5-0] and coming after that and bouncing back to draw this series is a tremendous team effort."
"I'd have loved to have the Frank Worrell Trophy this afternoon, but Steve has it for another two years. Hopefully when we get to Australia [in 2000-2001] the series will be as competitive as this one."Reuse content