I have read a couple of articles about negative/black SEO. They were explaining that important part of it is creating web sites with "bad" content that "stink" to Google. Back links from these sites are consequently penalized by Google and target sites receive negative bonus to their ranking.
However, I had a little argument with my friend today, who is from my point of view an experienced web developer and SEO optimizer. He told me that this negative SEO and penalized sites is complete nonsense. He gave me an example that there is no problem for a company to create link farm of "bad links" that would be imposible for any tool to block. So if negative SEO was possible, there would be many big internet companies with sites ruined by this SEO.
So I am asking you, because you always gave me good advice, is it fiction or fact?