Take a closer look at your PHB. The associates section of the paladin's class description is seperate from the CoC section. A paladin should dissaprove of evil characters that aren't trying to mend their ways, but he doesn't lose anything for associating with them unless he can be held responsible for their evil actions; something that's very difficult to do by RAW. Paladins falling for having evil associates is either an error or a DM being a D-bag.