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I got in touch with this guy to see what he had done to get the rankings. Turns out he actually runs a back link pool for a bunch of sites, none of which are in our industry. Moreover, he cloaks the pages so that the links are only visible to Google's spiders and not to visitors.
I had always considered this a black hat approach and would have avoided it myself. On the other hand, it really is working and has produced all of our top ranked pages. Is this site open to any reprimand from Google if the link pools get sniffed out? Or does the benefit outweigh the risk?
You have to ask yourself if the short-term boost for a few pages is worth the long-term risk of a Google purge for an entire site. Many people answer in the affirmative and don't get caught for a long time. Then again, when they are finally discovered, they are often the most vocal about "unfair" treatment by Google.
If we dare talk about ethics, in my opinion, risking someone else's domain with such a high risk approach requires, ethically, that the site owner be informed about and involved in the decision. It is their property that is being risked, after all.
Of course, that's not the real world right now. There are a lot of site owners who recently got nailed for practices that they claim they didn't know anything about. It's very much a "caveat emptor" world when hiring anyone who labels themselves as an SEO. Site owners should ask for full disclosure and not be naive. You're fortunate that the earlier guy was so forthcoming, and sharp to notice the anomaly before any big damages showed up.