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Penn State faces more fallout from sex abuse scandal

When the NCAA and the Big Ten conference announced punishing sanctions for Penn State on Monday in the Jerry Sandusky sexual abuse scandal, the impact for the school’s vaunted football team was tangible and immediate.

What’s harder to calculate is how much damage the scandal will cause to the rest of Penn State. Here’s why: The crisis was unprecedented — striking at the heart of the university’s identity, involving crimes that took place over a long period and implicating figures at the highest levels of university administration.

Penn State commissioned the investigation led by former FBI director Louis Freeh, upon which the NCAA sanctions were based, but crisis management experts suggest that it was just a first step needed to reassure donors, alumni, students and applicants to the school.

"They will have to do a lot to come clean," said Larry Barton, resident and professor of management at the American College in Bryn Mawr, Pa., and author of several books on crisis management. "It’s not going to go away merely by changing the cover of the alumni magazine to show a professor of anthropology."

The NCAA sanctions include a $60 million fine against Penn State’s football program — roughly the amount the team has earned annually — to be applied to fighting child abuse. The college athletic governing association also cut the number of football scholarships Penn State can offer in coming years and erased more than a decade worth of football victories from the official record. That meant the late Joe Paterno is no longer the winningest football coach ever.

The Freeh report "presents an unprecedented failure of institutional integrity leading to a culture in which a football program was held in higher esteem than the values of the institution, the values of the NCAA, the values of higher education, and most disturbingly the values of human decency," according to the NCAA conclusions and sanctions.

The Big Ten conference then barred Penn State from playing in postseason bowl games for four years, forfeiting an expected $13 million in revenue.

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The measures were "staggering" in scope with "potential to impact the program for a decade, if not much, much longer," NBC sports reported.

How much more will the sanctions and scandal scar the university?

Typically, donations to athletic donations take a hit when the crisis’ epicenter is in the athletic department, said Rae Goldsmith, vice president at the nonprofit Council for Advancement and Support of Education in Washington, D.C.

"There is traditionally a pretty specific division between giving to academics and giving to athletics," said Goldsmith. "When a crisis hits athletics you can see a hit to giving for athletics but not to academic programs."

On July 9, the university announced that a record number of individual donors had contributed a total dollar amount that was second highest in university history — $208.7 million — during the 2011-2012 fiscal year. That included money for the Nittany Lions.

The university trumpeted the "steadfast support" by alumni and friends "despite a year that was marked by unprecedented challenges."

However, those results cover the full fiscal year — going back to months before the scandal became public.

They were also announced a few days before the release of the Freeh report, which was a detailed and scathing indictment of key figures at the university who failed to act on eyewitness information of Sandusky apparently raping a child in campus showers and other information.

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The report emphasized the roles what it calls the "four most powerful people" at Penn State — "who failed to protect against a child sexual predator harming children for over a decade." It said they "concealed Sandusky’s activities from the Board of Trustees, the University community and authorities."

Among them was revered head football coach Paterno, Penn State President Graham Spanier, athletic director Timothy Curley and vice president Gary Shultz. All four were forced out of their jobs over the scandal.

Paterno was fired Nov. 9, and died two months later. Spanier was forced to leave his leadership post, but remains on at Penn as a tenures professor. Curley and Schultz are facing charges of failing to report alleged abuses and of perjury.

Sandusky was convicted on 45 counts on June 11 and is in jail awaiting sentencing.

In the near term, there are some tangible costs to Penn State as a whole.

The $60 million fine puts a dent in football revenue that is normally used to support non-revenue sports.

And NCAA President Mark Emmert said at Monday’s press conference that the money could not "come at the cost of reduced programs in the athletic department and other student scholarships."

In an email response to a query about covering that cost, Penn State spokesman David LaTorre wrote: "The University will use its athletics reserve fund, capital maintenance budget and if necessary, an internal bond issue, to address the fine. We’re pleased the funding will be used toward important programs to help children who are victims of child abuse."

Moody's Investors Service said Tuesday that it may cut its rating on Penn State's credit because of the sanctions and the scandal laid out in the Freeh report, which it said could hurt student enrollment and fundraising for the university, the Associated Press reported. Moody's says Penn State has about $1 billion in debt.

Goldsmith said the scandal may take a toll on student enrollment, though that cost is harder to quantify.

"If students are coming for a specific program, they will still come," said Goldsmith. "For students who were not committed up front and may have several choices, the institution needs to pay special attention."

Ex-Penn State president disputes Freeh report

But she noted: "It’s a challenge for any institution that relies heavily on the reputation of any one program. When there’s trouble in that program, the institution could have a significant branding problem."

Barton said he did not see a risk to the university’s ability to recruit high quality instructors or to its academics winning research grants.

However, he predicted that the scandal could discourage major donations from people who are thinking about their own legacies.

"There’s no way to calculate the untold gifts from potential contributors — especially from baby boomers — who are actively planning their estates. It’s going to be difficult for Penn State to earn the trust of those individuals," he said.

"It is important to know we are entering a new chapter at Penn State and making necessary change," Penn State President Rodney Erickson said in a statement after the announcement of NCAA sanctions.

"We must create a culture in which people are not afraid to speak up, management is not compartmentalized, all are expected to demonstrate the highest ethical standards, and the operating philosophy is open, collegial, and collaborative."

Barton argues that the university should create a comprehensive multiyear program that includes bold initiatives, such as removing most of the Board of Trustees, who the Freeh report noted had failed in their job of oversight.

"I think there should be a national conference on pedophilia that Penn State hosts,” said Barton. "It would say it happened here, it could happen to you."

"Handing the investigation over to Louis Freeh was an extremely smart, savvy first move," said Barton, the crisis management expert.  "But it really should not be the last one. It should be the liftoff to an ongoing series of reviews and disclosures about how do you turn a huge debacle into a better Penn State."

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