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I think we are jumping to enormous conclusions here, based on the news reports.  It has been reported that an assistant to Paterno witnessed the incident, but did not give details to Paterno.  Paterno, in turn and following Penn State procedure, reported the incident to his superiors and directed the assistant to give the details to them.  It seems that Paterno had no direct knowledge or specifics of the incident, only that it was "disturbing."  From that level of information and in light of the restrictions placed on him by the school human resources guidelines, there is not much more he could have done.