As far as I know, you are never allowed to discuss what happened in front of third parties. Therefore, if a Rito employee comes to the forum and says "you were banned because you insulted people", this is already beyond the line.
I do not know the exact policies followed by Rito in that regard, they seem to act like cowboys very often but I know that Square Enix follows this policy when it comes to their online games.
Lyte is unprofessional as *** at time.
To me I think they should just remove the report feature for issues related to chat. People have chat filters and the mute button. They just don't use it enough. I've just turned all chat off. and started muting teammates after the first dumb comment that comes from them.
I hardly report in the game but realistically you can pretty much report someone for anything which is stupid.
The problem is that the chat is still a window toward the community that is LoL and therefore people posting screenshots around with bad stuff will bring bad advertisement to the game if someone verify and finds out that "we do not take action regarding verbal abuse".
The game is targeted at people who lack the ability to talk appropriately, you can't afford to not punish them, for their own future as a gamer and more importantly as a human being. Teach them while they're young.
The problem is that Rito are greedy and do not want to spend money on a proper GM service. They use the players and automated stuff for that, with very few agents taking care of the most extreme cases or the ones that simply do not match their automated criteria.
But at the same time, having GM experience myself, I can tell you that over 90% of the reports made for verbal abuse/harassment and other inappropriate stuff (names etc) are immediately dismissed because people are huge pussies.