That is correct. Actually if you trade links with sites that have been delisted from Google, you will actually hurt yourself since those are considered “bad neighborhoods” by Google, and if you link to a bad neighborhood, then you site takes a hit…link to many bad neighborhoods and your site gets pulled from their index as well.
Always check a link partner before linking to them (if they link to you it’s no big deal). Here’s a site I use to make sure a site isn’t banned:
http://123promotion.co.uk/tools/googlebanned.php