You fire him now, of course. You fire Kelvin Sampson now, and you stop paying him at the end of the month as his contract allows you to do, and if you're Indiana you do those two things and then you don't look back.
You fire Sampson for bringing humiliation and the wrath of the NCAA and eventual competitive consequences. You replace him on an interim basis with assistant coach Dan Dakich or with assistant coach Ray McCallum or, hell, with Robert Montgomery Knight.
Who knows? Maybe this is why Knight resigned from Texas Tech in the first place. Since abruptly quitting, Knight has refused at every turn to acknowledge that his resignation is the same thing as a retirement, suggesting he might coach again. Maybe Knight cut loose from Texas Tech after hearing from sources at Indiana that Sampson was about to be labeled a recidivist, deceitful scumbag by the NCAA, and that Indiana was going to need a new coach by mid-February. Maybe the timing for Knight is merely serendipitous. I don't know, and I don't care. I don't like Bob Knight, wouldn't spit on him if he were on fire, but if you're Indiana you fire Sampson today and hire Knight tomorrow, because as unpleasant as Knight can be, he plays by the rules.
You fire Sampson immediately because letting him coach the rest of this season sends a message to the world that not only is it OK to cheat at Indiana, but it's OK to cheat at Indiana and then to lie about it to your bosses at Indiana and to your leadership at the NCAA. It sends the message that a cheater will be tolerated so long as he's a winning cheater -- because there is no doubt Sampson is a winning cheater. He's not a winner, because winners don't cheat. But he does win games. Cheaters often do.
GREGG DOYEL'S COMPLETE ARTICLE