When he was Archbishop in the early 1990s, Cardinal O'Brien arranged £42,000 compensation to one of the victims of Father Desmond Lynagh – who was jailed for three years in 1996 by Lord Prosser in the High Court in Edinburgh – and police were not informed.
Lynagh, 55, had admitted shameless and indecent conduct towards two youths between 1974 and 1976 while he was a teacher at Blairs College, near Aberdeen.
At the time, the college was the Church's Scottish national training college and the victims were aged 15 and 17. He later left the priesthood after criminal proceedings were raised against him. Details emerged after Cardinal O'Brien, Britain's most senior Roman Catholic cleric, resigned yesterday as leader of the Scottish Catholic Church.
He had been accused of inappropriate behaviour towards priests dating back to the 1980s, claims he contests.
Lynagh's actions first came to light in 1976 when one of the boys, known only as Michael, complained to the college authorities. Lynagh was moved to Stroud in Gloucestershire to a retreat for fallen clergy.
Michael was later astonished to find Lynagh was working as a parish priest at Bonnybridge, Stirlingshire, and warned Keith O'Brien, then Archbishop of St Andrews and Edinburgh, children could be at risk.
Once again, a decision was taken to deal with the matter in-house. Lynagh was sent away for treatment at a clinic for sex offenders. The archbishop also arranged for Michael to be paid £42,000 – the sum he could have expected from the Criminal Injuries Compensation Board if Lynagh had been convicted.
After his treatment, the priest returned to Edinburgh, where he was given an administrative job at the Church's Gillis Centre. Lynagh was asked to sign a document agreeing he would have no physical contact with children.
Four years later, a criminal investigation began after Michael, believing Lynagh was working with children walked into an Edinburgh police station. After details emerged, and before the court hearing, church leaders defended the cover-up, saying it would be wrong to report allegations of sex abuse to the police.
Father Tom Connelly, a spokesman for the Catholic Church in Scotland said at the time: "It is not up to the Catholic Church to phone the police. That is not our role." After Lynagh's sentencing, the Roman Catholic Church said it would review its policy on dealing with abuse claims.
When Archbishop O'Brien was appointed as cardinal in 2003, there was disquiet among students of Father Desmond Lynagh. One said: "Archibishop O'Brien allowed Father Desmond Lynagh to carry on instead of kicking him out of the priesthood."