Rlrouse,
I've been thinking about what you said and I have a question as to the logic of it. If what you say is true, a website could be created for the sole purpose of penalizing their competition's
PR.
For instance, you could have a website that sells widgets called widgets.com. You create another website, about-widgets.com, with a legitimate links page. You then contact your competiton and entice them to link to the about-widgets.com. After a time, you then change about-widgets.com into a link farm. Of course, your original site, widgets.com would have had no links to or from about-widgets.com. Wouldn't Google then discover the link farm and penalize all you had enticed to link to it?
I could see where Google could logically penalize a site for being a link farm, but not linking to or from one. Yes, you control your outbound links, but not the content of those to which you have linked. I also could understand Google not giving any weight to links from a link farm and not counting your links to a link farm as content. However, penalizing a site linking to one seems to open the door to all sorts of problems.
The odds are that with many outbound links, one of them is sure to become a link farm at some point in time, regardless of intent.