I routinely check all the outbound links from my site using a program from www.xpelo.com to look for sites I link to that Google has banned, and using www.linktiger.com to find any broken links. If your site has a ton of broken outbound links, or if you link to a website Google has banned, you can bet that Google will penalize your site.
I found one such banned link today on my site, on a page I hadn’t updated in a a while; I updated it with all the info I have on how to effectively get links to your site.
The article is here: How to Get Links To your Site
Good luck on using it. If you have questions about link building, I’ll be happy to answer them below.