The BBC has paid Diana, Princess of Wales's private secretary, Patrick Jephson, a "substantial sum" in damages and apologised unreservedly for the "harm caused to him" over Martin Bashir's 1995 Panorama interview.
Lord Dyson, a former master of the rolls and head of civil justice, was appointed to look into the circumstances surrounding the explosive interview, which famously featured Diana saying: "Well, there were three of us in this marriage, so it was a bit crowded."
The investigation was launched after Earl Spencer alleged that Bashir showed him fake financial documents relating to his sister's former private secretary and another former royal household member, and told outlandish and untrue stories about the royal family to gain access to the princess.
The documents falsely suggested the individuals were being paid for keeping the princess under surveillance.
In a statement, the BBC said: "The BBC accepts and acknowledges that serious harm was caused to Commander Jephson as a result of the circumstances in which the 1995 interview with Diana, Princess of Wales, was obtained, which have become apparent as a result of the Dyson Report.
"The BBC apologises unreservedly to Commander Jephson for the harm caused to him and has paid his legal costs.
"The BBC has also paid Commander Jephson a substantial sum in damages, which he intends to donate in full to British charities nominated by him."
The Dyson Inquiry found that the BBC covered up "deceitful behaviour" used by Bashir to secure his headline-making world exclusive interview with Diana, and "fell short of high standards of integrity and transparency".
The journalist was in "serious breach" of the BBC's producer guidelines when he faked bank statements and showed them to Earl Spencer to gain access to the princess in 1995, Lord Dyson's report said.
Mr Jephson, who was Diana's private secretary for eight years, said he will be donating the money to Ty Hafan, a children's hospice for which he helped arrange Diana's patronage in 1995 - the year of the Bashir interview.
He said: "After more than 25 years, it is a relief finally to reach a conclusion to this painful episode.
"I am grateful to Lord Dyson and the journalists whose tenacity has brought the truth to light and I now look forward to donating the damages I have been awarded to Ty Hafan, the hospice for children in Wales, in memory of the late Diana, Princess of Wales."
In a tweet, Diana's brother Earl Spencer said: "The right result - appalling what Patrick Jephson had to go through as a result of grotesque 'journalism'.
"Also terrible that it was covered up for so long by senior people at the @BBCNews - there will be more to come out on all this, before long."
The 1995 interview was watched by 23 million people in the UK and won Bashir a Bafta in 1996.
After Lord Dyson's report was published, Bashir apologised, adding that it was "a stupid thing do to do" but he will "always remain immensely proud of that interview".
Ireland-born Jephson is now a historical consultant to award-winning Netflix series The Crown.
