Former head of comms Rik Hammond was suspended for three years with full pay, but won his appeal last month after a panel of councillors threw out the allegations, citing a 'lack of evidence'.
Now the council has appointed Hammond to a newly created role in the chief executive's office to 'progress a number of specific communications projects'.
Hammond confirmed he is taking the role: 'I'm working with the assistant chief executive on a special project over the next two years. The case is done and dusted - it collapsed.'
Hammond was suspended in April 2007. The Luton & Dunstable Express has revealed that the case involved a total of 46 people.
Hammond was promoted to the role of head of comms in 2005 after working as interim PR manager at the council. He replaced Peter Morris, who left for Ealing London Borough Council.
Luton's comms division recently hit back at a Channel 4 news programme that covered the town negatively. The council responded: 'If there is one thing that Luton suffers from more than anything else, it is negative perceptions.'