Inappropriate comments or jokes could easily be handled with parent-teacher intervention and some detention. If it's possibly credible, then reporting it to the police to kick off an investigation is good. It seems that nobody really used their brain in the example given - everyone just trusted some automated system's determination instead of making their own.

>seems that nobody really used their brain in the example given

Brain users get jaded and a) stop b) seek alternate employment.

Schools don't just crush kids.