Paterno and the university reached agreement on the amended contract that eventually totalled US$5.5 million in August, months before charges were filed against Sandusky, but they began negotiating in January, The New York Times reported Saturday.
The amended contract, which was reported on by The Associated Press in April, included a $3 million career bonus if Paterno retired at the end of the 2011 season, as well as well as forgiveness of $250,000 in outstanding indebtedness and an additional $100,000 in loans.
The package also included access to a stadium box for his family for 25 years as well as parking privileges and access to on-campus hydrotherapy equipment for his wife.
The newspaper cited university records in saying Paterno first broached the idea of revisiting his contact in January, the same month he made a brief appearance before the grand jury, and some top university officials had also testified before the panel before the agreement was reached in August.
But the paper, citing "people with knowledge of the events," said details of the agreement were known to a handful of board members but not shared with the full board, which only learned about the lucrative contract when Sandusky was arrested in November and two university officials were charged.
Paterno then publicly announced he would retire at the end of the season in a statement that also told school trustees to focus their attention on other matters.
"I have decided to announce my retirement effective at the end of this season. At this moment the Board of Trustees should not spend a single minute discussing my status. They have far more important matters to address. I want to make this as easy for them as I possibly can," Paterno said at the time. "This is a tragedy. It is one of the great sorrows of my life. With the benefit of hindsight, I wish I had done more."
Trustees, who agreed Paterno had not done enough to stop the abuse, fired him later that same day, a decision that was followed by rioting in State College. Paterno died of lung cancer in January at age 85. Sandusky is awaiting sentencing after being convicted of 45 counts of having molesting 10 boys over a 15-year period.
Paterno family lawyer Wick Sollers told the Times on Friday that it was Penn State that proposed the lucrative retirement package, and that many elements such as the luxury box and use by Paterno of a private aircraft had existed in previous contracts.
Asked Friday if the university planned to try recover money from the Paterno estate, trustees chairwoman Karen Peetz said, "Contracts are contracts, and no, there's no plan to do that."