LOS ANGELES — When the University of Southern California lured a world-class ophthalmologist to run its medical school 10 years ago, it was part of a long, concerted effort to transform U.S.C.’s image from a school primarily for the children of this city’s wealthy, mostly white, elite with a penchant for partying and football into a major academic research institution.

Dr. Carmen A. Puliafito boosted the medical school’s ranking as its dean and raised hundreds of millions of dollars, becoming one of the highest-profile figures at a university packed with star faculty and supported by big donors.

Around Los Angeles, Dr. Puliafito garnered attention as a kind of bon vivant at glittery parties, grinning for the camera alongside celebrities like Pierce Brosnan, Martin Short and Jay Leno while bringing in as much as $9 million in a single night. But last week, this city was abuzz when a different side of the dean came to light after a scandalous report in The Los Angeles Times detailed how he associated with criminals and used drugs on campus, with some escapades captured in videos.

Now the university is under intense scrutiny over the circumstances of Dr. Puliafito’s exit from the school’s leadership and whether the administration deliberately turned a blind eye to problems with a prodigious fund-raiser.

The unwanted attention is rippling beyond the campus to Pasadena, a suburb with long and deep ties to U.S.C. When a police officer responded to a call at a Pasadena hotel where a woman had apparently overdosed in front of Dr. Puliafito, the officer found methamphetamines in the room, but he did not file a report for months. There were no criminal charges. The Pasadena city manager said last week that the episode “reflected poorly” on the city and police department.

For decades, U.S.C. has inspired fierce loyalty from its closely knit alumni network, which refers to itself as the Trojan Family, in a nod to the school’s mascot. It has a powerful base of supporters from Hollywood, as well as business and technology elites, who are hesitant to find any fault with the school. Dozens of trustees, professors, donors and students who were contacted for this story declined to speak on the record.

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“The community all feels this sense of shock and outrage,” said Dr. Steve Morrison, a medical school graduate teaching there part time. “What’s most upsetting is the sense that this was covered up for a very long time, that people knew about what was happening and nobody dealt with it.”

University officials announced late last week that they were moving to dismiss Dr. Puliafito and strip him of his tenure, after initially allowing him to remain on the faculty after the story was published. The school has retained a former federal prosecutor, Debra Wong Yang, to investigate the case and the university’s handling of it. After days of damaging disclosures, the school also hired a major crisis communications firm to guide it through a situation that many people here worry could damage its hard-earned reputation and undercut its fund-raising efforts, which could in turn put the president’s job at risk.

All of this has come at a time when this private research university — a field of handsome buildings, many made of red brick, lumbering across 300 acres just south of downtown Los Angeles — has emerged as a major economic, cultural and political power in the city. Earlier this year, C. L. Max Nikias, the university president, announced that the school had reached its goal of $6 billion in its latest fund-raising campaign, making it one of the top three universities in annual fund-raising, behind only Harvard and Stanford.

This can be seen in the bustle of construction across the university grounds, including, most recently, University Village, a $700 million housing and retail complex, the largest project in the school’s history. The university has plans to vastly expand its medical campus in Boyle Heights, an effort that will undoubtedly include an expansive fund-raising push. The university is the largest employer in Los Angeles County and draws broad support from across Southern California — with people sporting Trojan gear in every neighborhood from East Los Angeles to Brentwood.

“There was a time where it was thought of as a school for the socially prominent or upwardly mobile socially prominent people,” said Raphael J. Sonenshein, executive director of the Pat Brown Institute for Public Affairs at California State University, Los Angeles. “That has really been altered by their tremendous resources, recruitment of phenomenal faculty and a dramatic increase in their academic standards. It’s pretty remarkable. It’s one of the biggest transformations in California education.”

Supporters of the school, which has 44,000 undergraduate and graduate students, argued that the reputation it built over the past 20 years as it moved into the upper echelons of American higher education would allow it to survive the upheaval.

“It’s unfortunate that, in every profession, we find individuals who suffer from addiction,” Eli Broad, one of the city’s leading philanthropists and a major donor, said in a statement. “No matter the actions of one person, U.S.C. is a world-class university.”

Still, many people here found the details of the scandal — and suggestions that the university failed to aggressively intervene — highly unsettling. The news report described photos of Dr. Puliafito lighting a glass pipe for a female companion smoking heroin. A young woman who had been partying with the dean at a hotel in Pasadena in March 2016 was sent to a hospital after overdosing; methamphetamine was found in the room. The Los Angeles Times said that 10 days after that, school officials were tipped off to the overdose. On Tuesday, Charles Sipkins, a university spokesman, said that the president’s office had received an anonymous call about the episode, but that it never reached a senior administrator.

Dr. Puliafito resigned as dean about a week later, saying he wanted to pursue outside opportunities, but he remained on the faculty, continued to see patients and was honored at a reception on the lawn of the medical campus that June. “Carmen’s proven business expertise meshed perfectly with his superb medical skills,” Dr. Nikias said at the time. “He brought a new generation of exceptional clinical leaders, department chairs and world-class talent to our campuses.”

Only now, after the exposé, did the university move to dismiss him entirely.

By every measure, the case is far from over. Ms. Yang has just started her investigation. There are concerns that Dr. Nikias, 64, the university president since 2010, can be forced to step aside if the school is found to have ignored damning information about Dr. Puliafito. The videotapes mentioned in the Los Angeles Times article, including one in which Dr. Puliafito is said to be seen popping an orange ecstasy tablet, according to the newspaper, could end up leaking as the investigation continues, providing graphic evidence of behavior that so far has only been described.

The university’s efforts to recast its reputation — it was commonly referred to as the University of Spoiled Children — began under Dr. Nikias’s predecessor, Steven B. Sample, who served as president for 19 years. He began fund-raising aggressively so the school could build extensively, recruit (some critics preferred the word “raid”) top-notch faculty members and researchers from other universities and help pay for scholarships to attract more minority students.

“I don’t think it’s going to materially affect the school,” said Dr. David Warburton, a professor of pediatrics at the medical school. “Having said that, this is not good for morale in the short term.”

While much of the focus was on biomedicine, the school also expanded its media and political offerings, which served to raise its profile even more. Arnold Schwarzenegger, the former Republican governor, opened the Schwarzenegger Institute for State and Global Policy there. The George Lucas Family Foundation began a $20 million endowment to support black and Latino students at the university’s film school. The music moguls Jimmy Iovine and Dr. Dre gave $70 million to create a degree that combines business, marketing, design and liberal arts.

This year, the university received a record 56,000 applications and has a 16 percent acceptance rate, compared with 23 percent in 2011, reflecting the increasingly competitive environment. The number of instruction faculty jumped to 3,455 from 3,123 during the same period.

“It’s a pretty popular school with our kids,” said Ed Graf, director of college counseling at Isidore Newman School, an independent school in New Orleans. “Twenty-five years ago, most of our kids would have gotten into U.S.C. Nowadays, it’s risen up the ranks in competitiveness a lot.”

“To be honest, this kind of scandal, as horrifying as it is in some ways, you hear things like this almost every day in the news,” he said. “They get so many applications now, 60,000 or something, I don’t think it would have any impact at all.”

Terrence Jao, a third-year medical student, praised Dr. Puliafito even as he expressed shock at his behavior and worry about what it might mean for the school.

“It’s a disappointment — someone you thought you would respect, he has a whole other side to him,” Mr. Jao said. “He’s had a huge impact, but I feel like the scandal will take away a lot of that.”