Yes, that could very well lead to legal/criminal problems.  

This is completely inappropriate and I have asked that Roommates A and C please write me an email containing all inappropriate behavior by Roommate B.

Maybe none of them make enough alone, and they have a reasonably amount of other debt, but together they make more than 5x rent, all credit is great, and no criminal or eviction issues.

And if the community backs him, what are they saying about criminals in general?

An Umbrella policy may offer additional legal protections but nothing will protect you from criminal charges, which is a fairly rare occurrence in REI, unless you are a very shady character. 

@Sterling WhiteI do not, I am speaking strictly from criminal statistics, and close friends who are police officers in some of those neighbors and some of the issues they deal with.

I think that painting it Neon yellow to fix your problem was a brilliant idea.Hi, yeah, thanks for the vote of confidence, I would have painted it hot pink with yellow polka dots but I time was of the essence and I went with the closest color that would go over the beige color of the house before I painted it, soooo the whole cost effective aspect thing was on my mind ;) however I did raise the  rent from the $600 to $800 which gave me an extra $2,400 dollars a year which paid for the new toilet ($70.00) and then some, I add a $50 yearly increase to my Sect 8 rental leases, this way the case worker who one must contact in order to implement an increase can reference the agreement and approve the $50.00 a month fee, in my experience the case workers don't like to give any rent increases if they are not in the original lease, a definite way to avoid a long drawn out battle of climbing the chain of command who really couldn't care less if you are the best landlord (not a slum lord) and discourage anyone who asks for an increase by forgotten return phone calls to outright indignant behavior, lies and so forth, Happy trails Brother 

While credit checks aren't as important though I would still insist on a criminal background check, wouldn't want to introduce people to the neighborhood who are likely to be into criminal activity, especially if they were registered offenders. 

I charge per applicant because I run a credit/criminal on all of them.

Yes, I would run a credit and criminal report on the occupants as usual.