How do I tell my friend I think her friend is a bad person?

That is indeed the dilemma. On the one hand, I would not want to be the one cause of the friendship breakup, on the other hand I am wanting to look out for my friend. I would want to have a "sit-down" conversation, if you may, a conversation that has serious undertones and make my friend understand that what I am about to say explains my viewpoint on things at at the end of the day, my friend still has the choice to make whether or not my friend's friend turns out to be of the opinion I had stated. After I have established things so that it would be understood and clarified, I would say my piece and ask my friend about what my friend's opinion might be.