His complaints led to the portraits being removed at his request, and replaced by a picture of the Queen meeting Martin McGuinness, the former deputy first minister of Northern Ireland and ex-IRA leader.
Lee Hegarty, who is currently in charge of the Northern Irish Parades Commission, claimed that under human rights laws it was unfair to him to have to work in a place where he was offended by such portraits.
Former Ulster Unionist MP Lord Maginnis, who exposed the 'scandalous episode', said the portraits had been removed and Mr Hegarty was then consulted on what would replace them.
'One such photograph features Her Majesty the Queen shaking hands with the former deputy first minister, Martin McGuinness, at the Lyric Theatre in Belfast,' Lord Maginnis told the Lords.
'I do not mind that; what I mind is that the case brought by the complainant was settled secretly and that the sum of £10,000 was handed over, presumably for hurt feelings and distress,' Lord Maginnis told the Lords.