Jack was sexually abusing Danny. This is hinted at in a number of ways. Did ya notice what magazine Jack was reading right before he was summoned for his interview?
Note the innuendo in these lines:
Danny: "Tony is a little boy that lives in my mouth."
Doctor: "If you were to open your mouth could I see Tony?"
Danny: "No."
Doctor: "Why not?"
Danny: "Because he hides."
Doctor: "Where does he go?"
Danny: "To my stomach."
Doctor: "Does Tony ever ask you to do things?"
Danny: "I don’t wanna talk about Tony any more."