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PSU credit rating at risk as trustees vow to restore image

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STATE COLLEGE, Pa. -- The arduous task of rebuilding Penn State's shattered image began Friday with a pledge by the board of trustees to search for the truth amid an unfolding child sex abuse case against a former assistant football coach, a scandal that has already claimed the jobs of coach Joe Paterno and the school's president.

The vow came as the school faced a warning by the Moody's credit rating company that its bond rating could be downgraded because of risks to its reputation and finances from the scandal.

In front of an overflow crowd at a meeting that was moved from a hotel boardroom to a ballroom to accommodate more people, the trustees opened with Chairman Steve Garban welcoming the replacement president, Rod Erickson, and Gov. Tom Corbett, who had pressed publicly for fast action by trustees accustomed to deferring to former president Graham Spanier.

The meeting was the first public gathering of the 32-member board in the wake of the scandal, which has gripped one of the nation's largest universities and touched off a violent student demonstration. Besides the firings of Paterno and Spanier, an assistant coach who told his bosses in 2002 that he saw an assault was placed on administrative leave Friday.

Garban pledged to support Erickson - the trustees removed the "interim" tag on his new title but will continue to search for a permanent successor to Spanier -- as the board works "for the future of this institution that we respect and love." Erickson, previously the university's longtime provost, said Penn State must devote itself to its core values -- honesty, integrity, excellence and community -- now more than ever.

"I know we can do this. We are resilient; we are a university that will rebuild the trust and confidence that so many people have had in us for so many years," Erickson said in a six-minute speech to the trustees.

Without mentioning Spanier or Paterno, Erickson told trustees that their deliberate and decisive action had set a course for the university's future. He said his heart aches for the victims and their families, and he pledged to reassure Penn Staters that the university's future is still bright.

But Moody's Investors Service Inc. said it put the school's high Aa1 bond rating under review for a possible downgrade and will assess over the next few months the potential impact on the school from possible lawsuits, a decline in students applying to attend, the loss of donations from philanthropies and changes in the school's relationship with the state.

The strong current bond rating, like a credit rating for a person, reflects Penn State's attractiveness to prospective students because of its respected academic program and status as Pennsylvania's flagship and land grant university, Moody's said. That has drawn out-of-state students paying high tuition rates.

Paterno and Spanier were fired Wednesday in the fallout of a shocking days-old grand jury report alleging repeated, illicit contact between retired assistant coach Jerry Sandusky and boys as young as 10 over a span of 15 years, sometimes in Penn State's facilities.

Meanwhile, Paterno's son, Scott Paterno, said his dad had retained attorney Wick Sollers, of the law firm of King and Spalding.

"Like everyone who has watched this story unfold, my father is experiencing a range of powerful emotions. He is absolutely distraught over what happened to the children and their families," Scott Paterno said in a statement. "He also wants very much to speak publicly and answer questions."

But he said his father has "no choice but to be patient and defer to the legal process."

"He cooperated fully with the grand jury," the son said, "and he will continue to cooperate with the investigation as we move forward."

The grand jury report said administrators did not contact law enforcement authorities after a graduate assistant for the football team said he saw Sandusky sodomizing a boy of about 10 years old in the locker room showers at the team's practice center in 2002. Top school officials, including Paterno and Spanier, say they weren't told about the seriousness of the matter.

Sandusky has been aware of the accusations against him for about three years and has maintained his innocence, his lawyer has said.

The board adjourned after forming an investigative committee, to be headed by trustee Kenneth Frazier, the CEO of pharmaceutical company Merck, to dig into the university's failure to stop Sandusky. Ronald Tomalis, a trustee and state education secretary, will be vice chairman.

The rest of the committee has yet to be formed, but Frazier said it will have the power to hire independent lawyers and plans to publicly release the entirety of its findings.

"That's absolutely what we intend to do," Frazier said after the meeting. "The purpose of this investigation is to ensure that the public understands everything that we learn in this investigation, and a report will be made completely public as quickly as we possibly can."

The university as a whole, however, has a long way to go before anything can be considered routine now that Paterno, whose 46 years leading the Nittany Lions turned him into an icon in the area known as Happy Valley and beyond, is gone. The school named defensive coordinator Tom Bradley interim coach on Thursday.

Paterno's firing touched off a violent student rally late Wednesday night, requiring police in riot gear, at times using pepper spray, to disperse about 2,000 people who took to the streets and toppled two TV news vans.

The university's faculty senate on Friday called on students and employees to "act in ways that bring honor to our institution and ourselves."

Sandusky served as Paterno's top defensive assistant for more than two decades and was considered his heir apparent. But he abruptly retired in 1999, about a year after university police investigated a complaint by a woman upset that Sandusky had showered with and bear-hugged her 11-year-old son, the grand jury report alleged.

Authorities said Sandusky met many of the boys through The Second Mile, a charity he founded in 1977 to help at-risk youth.

Former athletic director Tim Curley and former university vice president Gary Schultz have been charged with perjury and failure to report the 2002 assault, as required by state law. Lawyers for the men say that they are innocent, that they told the truth to the grand jury and that they told Spanier what they knew, fulfilling their legal obligation.

About a week and a half after the 2002 incident, the graduate assistant -- identified by people familiar with the investigation as Mike McQueary, now the team's wide receivers coach -- met with Curley and Schultz and told them he had witnessed what he believed to be Sandusky having sex with a boy, the grand jury report said.

McQueary was placed on administrative leave Friday, Erickson said, and won't be coaching at Saturday's game against Nebraska because he has received threats.

Spanier told the grand jury that Schultz and Curley went to him and reported an incident that made a member of Curley's staff "uncomfortable."

"Spanier described it as 'Jerry Sandusky in the football building locker area in the shower ... with a younger child and they were horsing around in the shower,' " the grand jury report said.

Paterno, major college football's winningest coach, has said he wasn't told "the very specific actions" contained in the grand jury report, but he also has acknowledged that "with the benefit of hindsight, I wish I had done more."

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