First off DMOZ is a great directory. What they do COULD NOT be done without all the volenteers. The vast majority of which are hard working and honest. A few though are not..... welcome to life. If and when they're caught they're gone
as for legal recourse. *L* read the disclaimers at DMOZ.
you ask, "Is this what DMOZ.ORG allows". of coarse not, but they have to find out about it first. There's no way they can police all the volenteers and accomplish building the largest director on the net.
When you see a problem like this, tell them about it. It's generally taken care of rather quickly