The obvious reasons not to tell would be to avoid a scandal and because they thought they had the situation under control. Also, there would be no political "blow back" for taking down a legend.
Repugnant, perhaps, but the same thing happened in Cambria County with the Altoona-Johnstown Diocese. An ADA, now a judge, named Patrick Kiniry, went to the bishop and the matter was taken care of by transferring the pedophile priest to another location. It is not unknown in Central Pennsylvania.
BTW: It is not illegal in either case as District Attorney's have the discretion not to prosecute. In other words, no crime by Kiniry (who is still a sitting judge) and no crime in 1998 for CSS, Paterno, or Gricar, if he shows up.
It would, however, create a situation where people at Penn State knew and if any of those people is Curley, Schultz, Spanier, or Paterno, it throws a completely different light on their actions in 2001.