Prosecutors allege that Peter Gatien, the tsar of New York's disco scene, allowed the two clubs to become corner shops for the drug's sale. One of 24 people arrested in a police raid on Wednesday, a spokeswoman for his clubs said he would fight the charges. "He firmly believes that when the evidence is examined the charges will prove baseless," she said.
Frequented by students and teenagers - as well as occasionally by film and pop stars such as Hugh Grant and Grace Jones - the clubs are landmarks of after-hours' New York. The Limelight, opened in 1983, occupies a former Episcopalian church in the Chelsea neighbourhood. The Tunnel, where Mr Grant was spotted by tabloid reporters last weekend, boasts a football pitch-sized dance floor inside what was once a railway shed. Both establishments remain open.
"These clubs existed to distribute these substances," said Zachary Carter, a United States Attorney, after Mr Gatien's arrest. "The drugs were the honey trap that attracted young people to the clubs in the first place." A third club owned by Mr Gatien, the Palladium, is not implicated in the case.
The police investigation is believed to have been sabotaged on several occasions by leaks that gave Mr Gatien prior warning of raids. There were reports that at least one policeman was to be arrested on charges of having supplied the information to Mr Gatien.
Easily distinguishable by the pirate-style eye-patch he has worn since an ice-hockey accident, Mr Gatien had recently earned a degree of respectability. He was a producer of the Robert De Niro film A Bronx Tale and had been serving as consultant to the Olympic Games organising committee in Atlanta on providing after-hours entertainment.Reuse content