It's not about what they did, it's about what they will do. Of course their past is a factor in their future, but you could also view it in a different light: they are perhaps more motivated to succeed, or the automatically closed doors they get from other employers might mean you get better qualified people at a lower price if you take them into consideration.

Besides, I've met enough terrible people who were smart or lucky enough not to get convicted. Being a felon or not is (almost) no indication as to someone's character, just how adept they are at dodging the law.