Important correction to post 1. The Bishop reported the priest to the police the very next day and also provided them with the picture. The police advised the Bishop that this did NOTconstitute child pornography. The Bishop also consulted his lawyers, who advised him the same. In other words, there was no prosecutable offense.
However the bishop decided even if they did not have enough evidence to pursue an actual criminal charge, the computer files and the subsequent emotionally unstable behavior of the priest warranted getting him away from children immediately, which was done and which the priest agreed to. A few months later the priest broke his agreement and went to a child’s party at the invitation of a parish parent (sometimes you have to wonder is some of the blame rests with parents, why do none of them ever report these abuse cases?).
This unexpected lack of obedience by the priest (you would think a suicide attempt would indicate repentence, but this is a mental illness), prompted the bishop to immediately RE-CONTACT (2nd time) the police and ask if there was anything they could do to look into the matter. The police then took over, search warrant and their efforts leading to the arrest.
Seems to me this bishop did everything he could as info became available, especially considering the first time he was going by the police and attorneys own advice of whether a crime was committed.