My employer watches porn during work hrs. om a regular basis. Recently a co-worker walked in on him masturbating.....

Obviously, this scenario would be objectionable in any setting, much less a work environment. In addition to constituting a hostile work environment, his actions would likely be criminal if you have recounted them accurately here. I would not hesitate to report him to the authorities for his indecent exposure and to the EEOC for the HWE claim. You would likely be shielded from any retaliatory behavior by Title VII's anti-retaliation provision.