Dame Shirley Porter has paid £12m into Westminster Council's bank account in settlement of the surcharge for her role in the homes for votes scandal.
Dame Shirley Porter led the council in the 1980s
The former leader of the local authority had played a key role in a scheme that sold off council homes to potential Tory voters.
She originally faced a judgement debt of some £27m plus interest and costs, following a prolonged legal battle.
But she was offered a deal to end the long running saga.
The gerrymandering scandal relates to a decision in July 1987 by Westminster to sell 500 homes each year under a policy called "building stable communities".
District Auditor John Magill later accused Dame Shirley and a former colleague, David Weeks, of "wilful misconduct" and "disgraceful and improper gerrymandering" following an investigation.
The issue went to the House of Lords and Dame Shirley and Mr Weeks were told to repay the losses claimed by the council.
The Tesco's heiress then claimed she had assets of just £300,000 but Westminster City Council engaged in a long-fought legal battle to force her to pay. That included getting overseas assets frozen.
Westminster has said the settlement is in the best interests of local people as it will avoid further legal battles.
Labour MP Peter Bradley, an ex-councillor at Westminster, last week warned against the deal hatched with Dame Shirley arguing it was unfair on victims.
He told MPs: "Shirley Porter was responsible for the worst, the most cynical and callous and indeed the most costly conspiracy of political corruption in this country in the modern age."
The 1980s scandal saw council homes sold off to potential Tory voters in marginal wards in a bid to boost Conservative election prospects.
Westminster Council's deputy leader Kit Malthouse said about £1m of the cash would go to the Audit Commission to cover its expenses in fighting the case to the House of Lords.
The remaining money would be invested in services and facilities for the local community.
In a statement, he said: "Earlier this year Westminster City Council reached a £12m mediated agreement with Dame Shirley Porter in full settlement of
the outstanding surcharge. On 1 July, the entire amount was deposited into Westminster's bank account.
"Approximately £1m of the money will be allocated to the Audit Commission towards legal costs its appointed auditor incurred in on taking this
matter through the appeal courts up to and including the House of Lords.
"The remainder will be reinvested in the Westminster community.
"The exact allocation of this money will be decided, following consultation with the District Auditor, at a Cabinet urgency meeting to be held shortly."