There's also optics. Flagging the story just feeds the narrative that YC is "hiding" something regardless of the truth.
When you see a PR train coming down the tracks... get out of the way. You can stand there and yell at it all you like but it won't matter. When you get to a certain point in life (high office, large influence, and/or lots of money) there is nowhere to punch but down. That means you have to stop throwing punches or you have to accept the hate. Those are your two options. On the plus side you're still really rich and/or powerful so it isn't exactly a bad deal.
Agreed in general, and we make a careful point of moderating HN less, not more, when an article is critical of YC or YC startups, although 'less' doesn't mean 'zero' (one learns about loopholes the hard way when running a web forum). But it's a moot point in this case; HN users have flagged the story overwhelmingly and the comments make it clear why. Since the community response is so clear, I think it's probably sufficient for us to simply explain that moderators haven't intervened in any way.