Joe Paterno started re-negotiating a new contract with Penn State as he learned that his former defensive coordinator, Jerry Sandusky, was being investigated for the widespread sexual abuse of young boys. According to a report by Jo Becker in The New York Times, Paterno unexpectedly approached his superiors at Penn State and started to work out a new deal in January 2011 -- the same month he gave his testimony in front of a grand jury for the Sandusky case.
Paterno's contract at that time was set to run through 2012, but by August 2011 he came to an agreement on a new contract. According to Becker, Paterno and university president Graham Spanier worked out a deal that stipulated 2011 would be his last season as head coach at PSU. The outline of the deal:
Mr. Paterno was to be paid $3 million at the end of the 2011 season if he agreed it would be his last. Interest-free loans totaling $350,000 that the university had made to Mr. Paterno over the years would be forgiven as part of the retirement package. He would also have the use of the university's private plane and a luxury box at Beaver Stadium for him and his family to use over the next 25 years.
The university's full board of trustees was kept in the dark about the arrangement until November...
In November, the Sandusky scandal had garnered widespread national attention and the pressure to remove Paterno had mounted on the university Board of Trustees. Paterno saw the writing on the wall and quickly issued a statement saying that the Board did not need to act, that he would step down at the end of the 2011 season. Of course, according to Becker, that had already been arranged:
Mr. Paterno quickly issued a statement saying, in effect, that the board need not act, that he would resign at the end of the season. Neither he nor the university revealed that he had effectively agreed to do so already, in return for an expensive financial package.
As the external pressure mounted, the Board would act quickly and fire Paterno. But in the struggle with the family and amid widespread criticism in State College, they would not strip him of any of the retirement benefits previously agreed to:
In the end, the board of trustees - bombarded with hate mail and threatened with a defamation lawsuit by Mr. Paterno's family - gave the family virtually everything it wanted, with a package worth roughly $5.5 million.
Becker writes that the family's fight for money during the ouster of the head coach is another indicator of the power he held in Happy Valley. An attorney for Paterno, Wick Sollers, stated that the university proposed the retirement package in the summer of 2011 and that the perks had long been a part of his contract.