Clive Davis was ousted from his position as president of Columbia Records (part of CBS) in May 1973 when the company filed a civil suit accusing him of using $94,000 in company funds (roughly $700,000 in today’s money) for personal expenses.
The specific allegations included:
Apartment Renovations: embezzling company money to pay for extensive remodeling and alterations to his New York City apartment.
Lavish Parties: Bankrolling a $20,000 bar mitzvah for his son at the Plaza Hotel.
Vacation Housing: Renting a summer home in Beverly Hills using corporate funds.
Davis was eventually charged with six counts of tax evasion, of which he pleaded guilty to one lesser count and was otherwise exonerated.
Clive Davis as president was also accused of providing drugs to artists. While a grand jury investigated the broader music industry’s involvement in hard drugs and payola at the time, Davis vehemently denied personal drug involvement.
He went on to found Arista Records in 1974.
The music industry’s recorded connection to payola and hard drugs involves a shift from cash bribes in the 1950s to “drugola” in the 1970s—where record labels traded cocaine and heroin to radio DJs and artists to secure radio airplay, bypass federal laws, and solidify mob ties.
1. The Era of Traditional Payola (1950s)
What it was: Originally coined in the 1930s, payola was the illegal, undisclosed practice of record labels bribing disc jockeys (DJs) to play their songs and boost artificial popularity.The Scandal: During the rise of rock and roll in the 1950s, record companies funneled cash, vacations, and writing credits directly to DJs.
A 1959 congressional investigation led by the FCC destroyed the careers of influential DJs like Alan Freed and ruined reputations. Congress officially amended the Communications Act in 1960 to outlaw undisclosed payments.
2. The Rise of “Drugola” (1970s)
What it was: Following the 1960 federal crackdown, labels and promoters had to adapt. Because money trails were scrutinized, some executives began bribing DJs, musicians, and radio program directors with hard drugs, most notably cocaine.
The Clive Davis CBS Scandal: In 1973, federal investigations into Columbia Records (spearheaded by the U.S. Attorney’s office in Newark) revealed massive corporate corruption. A federal grand jury probe unveiled that record executives sometimes supplied illegal narcotics—paid for with convertible, stolen rock albums—as a form of payola to secure playlist additions.
Mob Connections: The U.S. Senate investigation also pointed to reputed Mafia infiltration in the industry, where organized crime figures allegedly collaborated with record executives in drug trafficking networks and strong-armed promoters.
3. Structural Shifts and the Modern Industry
Independent Promoters: To avoid liability, major labels increasingly outsourced their promotion to third-party independent promoters. By laundering the bribes through these external entities, labels could distance themselves legally from accusations of “pay for play”.
Modern Implications: Though hard drug payola faded as a widespread corporate strategy, federal scrutiny over “pay for play” has continued periodically into the 21st century. State and federal investigations, such as those led by former New York Attorney General Eliot Spitzer in 2002, have continued to target labels for indirect gifts and promotional deals.