According to Steve McConnell famous book “rapid Development” he stated that:
“Uncontrolled problem employees. Failure to deal with problem personnel also threatens development speed. This is a common problem and has been well-understood at least since Gerald Weinberg published Psychology of Computer Programming in 1971. Failure to take action to deal with a problem employee is the most common complaint that team members have about their leaders (Larson and LaFasto 1989). In Case Study 3-1, the team knew that Chip was a bad apple, but the team lead didn’t do anything about it. The result—redoing all of Chip’s work—was predictable.”
From my experience, i found that the problem is much more than that. It has a very bad phsycological effect on all team players. they feel all their hard work is washed away by this person(s).
Emad's Blog 