There is truth...
and there is truth. If your team members are jerks, smarter than you, not smarter than you, sleeping with a Rottweiler, or just a plain pain to be around, you have to spread the varnish to keep a working environment going.
If you've got a co-worker cooking the books, jerking around customers, or falsifying reports just before bonus time comes around... you can't let that slide. If you're one of the people a little shy in the ethics department yourself, for your own self-preservation you can't take a risk in getting caught up in shenanigans.