This is a RUSH transcript from "The O'Reilly Factor," July 12, 2012. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: And in the "Impact Segment" tonight, the "Kelly File" -- a new report on Penn State and the child molester Jerry Sandusky puts that university and the people of Pennsylvania in a very bad place.

Former FBI Director Louis Freeh headed up the investigation.

(BEGIN VIDEO CLIP)

FREEH: The most powerful leaders of Penn State University: Mssrs. Spanier, Shultz, Paterno and Curley repeatedly concealed facts relating to Sandusky's child abuse from the authorities, the Board of Trustees, the Penn State community and the public at large.

(END VIDEO CLIP)

O'REILLY: That, of course, opens up the potential for massive lawsuits against Penn State. Here now attorney and Fox News anchor Megyn Kelly.

So how did Freeh arrive at that conclusion?

MEGYN KELLY, FOX NEWS ANCHOR: Oh they've investigated it for months. They've reviewed over three million documents. They've interviewed several witnesses -- all but Joe Paterno who died after he was, you know, these allegations first surfaced last year.

And it's very clear. I mean they produced the e-mails in this report that show these four men knew or had reason to know exactly what was going on with this -- with this Sandusky and did nothing because of two things. Number one, they wanted to be humane to Jerry Sandusky, the molester; and number two, they were worried about the bad publicity for Penn State.

That is the conclusion of Louis Freeh. That these guys, when confronted with an allegation that this guy, Sandusky was raping a child in 1993, decided not to do anything about it, not to report it to the board of trustees and to move on. And in 2001, did the same thing when same allegations surfaced. And during that time and thereafter they allowed that man, who now they had two allegations of sexual abuse against, to come on the campus with an all access pass bringing with him young boys, allowing him access to the showers with the young boys.

O'REILLY: All right.

Now the three executives at Penn State -- obviously Paterno is deceased -- can they be charged with the crime?

KELLY: Yes they can. And --

O'REILLY: And they probably will be based on this.

KELLY: And reportedly they are looking into this. Yes this is the former president Graham Spanier, Shultz and the other guy Curley --

(CROSSTALK)

O'REILLY: Curley, right.

KELLY: -- are already facing charges for perjuring themselves allegedly before the grand jury trying to make it sound like they knew more than they did.

O'REILLY: But now -- but now it gets up in the sense that they could be charged with other crimes, felonies.

KELLY: Yes.

O'REILLY: Ok.

KELLY: Failure to report and so on.

O'REILLY: Right.

KELLY: I mean it's -- it's clear now from this documentation and from the Freeh report that there was a consciousness of wrongdoing on their part when it came to Sandusky and a motivation to cover it up for the good of the football program and the University.

And not only that they now talk about there is anecdotal evidence about two janitors --

O'REILLY: But here's how bad it is --

(CROSSTALK)

KELLY: -- who allegedly witnessed it and didn't want to come forward because they said if you went in to Paterno to talk about Sandusky it was like talking to the President of the United States.

O'REILLY: Ok but here's -- but here is how bad it is. If they wanted to protect the football program and the University they could have just quietly fired Sandusky. Just get him out all right. I mean they should have, of course, reported him to the authorities when the first allegation came up. That's what any decent person would do.

KELLY: Right.

O'REILLY: But they didn't even do that as you pointed out. They enabled him to do more of it.

KELLY: Right and more rapes happened. More rapes did --

O'REILLY: And more rapes happened.

KELLY: --- it wasn't theoretical; more rapes did happen.

O'REILLY: Right. Ok.

KELLY: At least and maybe as many as 20.

O'REILLY: So, on his conscience -- on his conscience and if there is an afterlife Joe Paterno is going to have to explain that, all right, because he's dead and his reputation is shot. And he was once one of the most respected athletic people in the country. He's done.