This teacher does need to learn some things about instructional design. It is really important for nobody to feel taken advantage of, which would remove any social benefit of having them work in teams. And the frustration sounds appalling for all of them.
Maybe you could recommend Larry Michaelsen's or Jim Sibley's work on team-based learning. Their model typically recommends that the group grades be weighted so that the contribution of each group member is taken into account. You teach the kids how their work will be assessed by you and by their teammates, at the end of the project you have them weigh their own contributions and those of the other kids, and then you examine the results of that process and use it as part of their individual grades.
See, for example,
http://www.teambasedlearning.org/Default.aspx?pageId=1032384DeeDee
