What make a clan's reputation is its members. If the clan leader and the assist fail to keep his/her clan clean, then they deserve the reputation that come with. Now its personnal choice of every members to either stay in the clan flagged as cheating, or leave the clan to try to keep their own reputation.
Would you go in heart surgery at an hospital that you know one of their doctor use cocaine? Can you understand this doctor can destroy the hospital reputation ?
Anyway, i'll consider members of a flagged clan as a cheater.