An agreement reached at the High Court yesterday is a victory for the former television chief, who has always claimed he was made the scapegoat for the embarrassing escapes of three dangerous men from Parkhurst prison on the Isle of Wight - only weeks after IRA terrorists had fled another top security prison.
The settlement, in what has been a personal and acrimonious battle between the two men, re-opens the thorny question about whether ministers, who decide prison policy, or civil servants, responsible for day-to-day operations, were to blame for the failures that led to the debacle.
Mr Lewis, who, from the moment he was dismissed last October made it clear he would not go quietly, immediately accused Mr Howard of wasting taxpayers' money. He said: "The attempt to distinguish between policy and operations was no more than a political figleaf - such a small figleaf that it was grossly indecent."
The former prison chief has issued his writ in the middle of a political storm over the running of the country's jails, claiming 12 occasions when Mr Howard intervened in operational duties - including the question of Private Lee Clegg being held following a right-wing press campaign to free him. Those close to Mr Lewis claimed that if his action ever reached court it would damage Mr Howard even more.
Mr Lewis will now receive a year's salary of pounds 125,000 but will fight for bonus and pension contributions worth pounds 75,000.
"These legal proceedings should not have been necessary," he said. "This has been an open-and-shut case from the beginning and yet I have received no explanation for my dismissal or any apology."
Adding to Mr Howard's embarrassment yesterday was the news that he has still not been able to find a successor for the man he sacked. Headhunters have told the Home Office the task of finding suitable candidates to head Britain's troubled jail system has been hampered by the treatment of Mr Lewis.