The primary concern of other finalists was that Dondero was buying stocks in his CNBC portfolio and then driving up the price by buying the same stocks in the real market the next day. That's easier to do with thinly traded stocks than heavily traded ones. Dondero did pick some thinly traded stocks, but not all of those trades were successful. He also made other kinds of purchases that contributed to his portfolio returns.

But CNBC still has a way to disqualify Dondero because in the middle of the contest it asked 20 finalists to sign a statement that any real-world trades they made were not "for the purpose of, or with an intent to, affect or manipulate the price" of the stocks they were picking in the contest. The penalty for failing to sign was stiff: "If you fail to return the attestation or your attestation is not truthful, you may be disqualified from the contest," according to CNBC Vice-President of Marketing Tom Clendenin.

Securities regulatory records raise questions about Dondero. The New Jersey Bureau of Securities records pertain to Dondero's time at a day-trading firm in Iselin, NJ called Evolution Financial Technologies. The records say that, "As a result of his trading activity, Mr. Dondero was on heightened supervision and probation which resulted in his changing from a proprietary trading to a customer. This did not involve customers or a loss." Dondero chose not to comment.

Although the Million Dollar Portfolio Challenge has attracted 375,000 contestants and tripled traffic to CNBC's web site, I wonder whether all the negative publicity surrounding this contest has been worth it.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns shares of GE and has appeared as a guest on CNBC.