Should 'that' be removed and "The" in lower-case?

Leaving aside the bizarre sentiment, no there is nothing wrong with the construction of the sentence. In the reported speech, "The" is capitalized because it is the initial word of a sentence.

There is a distinction to be made here--the initial word of a sentence is capitalized, which means that the first letter, and only the first letter, is in upper-case. When one says (or writes) upper-case, or lower-case, it means that the description applies to all of the letters in the word.

Thanks, Setanta.

It is stated that “The beginning of the Latter Day of the Law will not be without inconspicuous benefit."

In reported speech, shouldn't "that" be removed?