Hettie Peters was suspended by the Labour Party after her arrest in 1995. She subsequently joined the breakaway Hackney New Labour group.
Despite being exonerated, Ms Peters is furious that she was put through a 15-month ordeal. Ms Peters - who is black - told LGC she had been a target of abuse ever since she backed housing director Bernard Crofton when he was accused of racism.
She claimed she was put on the panel hearing the Crofton case 'because of the colour of my skin - but I play nobody's game'.
Meanwhile, an investigation into Hackney housing committee chair Simon Matthews has been resolved. Chief executive Tony Elliston launched the inquiry late last year after claims that Mr Matthews failed to declare a non-pecuniary interest while voting on the sale of council property to a housing association.
Mr Matthews failed to mention that his wife, Denise Robson, was a non-executive director of the Agudas housing association.
A Hackney spokesman said: 'The chief executive has written to councillor Matthews telling him the matter has been resolved. Councillor Matthews has accepted he should have declared an interest and will do so in the future should the need arise.'