I think you are absolutely correct in thinking that the investigation was done on the down low. But at Penn State the hierarchy is Joe Paterno, God, and then down the line. It strains credulity to think that Penn State University Campus Police investigators, as well as State Police investigators, wouldn't have let Paterno know that this threat to HIS program existed. And that's just on the professional level. Sandusky had been a pedophile long before 1998 and all the while he was close friends with Paterno.
It's a good idea that Paterno has retained legal defense council.