Alberta Health Services says former chief financial officer Allaudin Merali will receive the severance owed under his contract.
"AHS is satisfied that the termination of Mr. Merali’s employment is properly characterized as having been without cause," an AHS news release said Friday.
"AHS has honoured its contractual severance obligation. A total of $900,000 will be paid to Mr. Merali."
Tahneen Luedee of Alberta Health Services said the agency is not providing further details on the settlement, such as whether taxpayers are also covering Merali's court costs.
"On the recommendation of legal counsel, government has participated in a settlement that is believed to offer the least possible burden to taxpayers," Health Minister Stephen Mandel said in a statement.
AHS operates under the Alberta Health Department. It is in charge of delivering front-line care while the department sets policy.
In recent years, AHS has been stung by reports of extravagant and inappropriate staff spending along with generous severance payouts to senior managers.
The Merali case is a symptom of a much larger problem, said NDP member Deron Bilous.
"Albertans are paying for the PCs' knee-jerk reaction," Bilous said in an interview.
"Why was (Merali's) contract as big as it was, along with this massive severance?
"AHS just seems to be this massive bureaucracy for this PC government to hide behind."
Liberal member David Swann suggested the PCs knew at the time that they would have to pay up, but fired Merali anyway.
“Essentially, the PCs fired Mr. Merali in order to make a bad news story go away. It was a PR move," Swann said in a news release.
“How much more of Albertans’ hard-earned money was wasted in this botched attempt at PC damage control? How much was spent on government lawyers and court costs to fight what was clearly a losing case?"
Wildrose critic Heather Forsyth took a moderate tone.
"It’s time to close the chapter on this story of mismanagement and begin focusing on positive solutions to end this type of waste and improve access and outcomes for patients," she said, also in a news release.
Merali was hired by AHS in 2011 as chief financial officer. A year later, he was let go after reports of questionable spending. An audit later determined he had racked up almost $370,000 in questionable expenses.
The money paid for lavish dinners and outings, a butler and the cost of putting a phone in his Mercedes Benz.
Merali could not be reached for comment Friday, but in December 2012 he publicly defended himself.
He said the hosting expenses were skewed because they should have been spread around among other executives, but he was often the one left holding the bill.
He also said the butlers hired for some of the events were in keeping with common practice.
Merali said $2,303 to install a Bluetooth phone in his Mercedes Benz and $525 to fix a car window were valid charges for an executive in a $3-billion organization who needed to be available at all times.
"The imputation that I simply lived a high life at the taxpayers' expense is an invention of sheer malice," he said at the time.
In March, Merali sued AHS and then-health minister Fred Horne. He claimed they first supported his spending, then later made him a scapegoat to distract from similar issues with other AHS executives.
Merali had a history of controversial spending.
Prior to working at AHS, he worked for the Ontario government giving advice on how to implement an electronic health-records system. In 2009 his contract was not renewed.
Documents released to the public showed he had been billing taxpayers about $76,000 a month for flights, pricey meals and hotel accommodations.
AHS officials said they knew about Merali's track record when they hired him in the spring of 2011, but he had promised to adhere to strict new spending rules.