I think Karama didn't report the knife, because he felt he was responsible for this kind of behaviour. Reporting it would also mean the brass would learn that he had harassed her. He's too smart not to know that his behaviour was wrong, and maybe that's also the reason he accepts the responsibility and blames only himself, not anyone (or everyone) else.
In a Cardassian library
or in a Cardassian gallery
"Reagan, it appears, is really only an ardent unionist if the unions in question are in Poland" - Stephen King, Skeleton Crew