No one but "the person in charge of the institution" (according to 23 Pa.C.S. § 6311) is legally required to make such a report. The observer (a graduate student) notified other staff members who reported it up-chain. No one below TPIC of PSU (however that is determined) is required to report what was observed. Given the impact of such an accusation (especially if false) it is no wonder that no one wanted to stick his neck out. There is no reason to suspect that "the role that high-money sports play" affected this any differently than had it been any other department of the university.
... The problem is that such major university athletics departments are simply farm teams for the professional sports industry. The academic institutions have no more control over them (or the money they generate) than Staples does over what happens in "their" arena.
He says the university board has handled the case in an "abysmal" fashion:
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If the university president knew about it, investigated, found it credible, and failed to report it, that should be an automatic dismissal. To fire those below who duly reported the incident and had no further legal obligation is a huge (and lawsuit-worthy) overreach.
And we should take it easy on head coach Joe Paterno:
By all reports, the head coach that was fired has one of the best reputations for running a clean and honorable department. I suspect he was happy to get such an explosive issue out of his hands and in the lap of someone higher up the food chain. I think those who are piling on (starting with the Trustees, the media, and now politicians) should be invited to describe what they would have done with such a unverifiable report from a graduate student. If they say they would have gone straight to the police, they are either naïve or mendacious.