It is a private group doing the 'entrapment', not the police. Here's what wikipedia says about the group:
http://en.wikipedia.org/wiki/Perverted-Justice.com
When I read the 'PJ' website a couple of years ago I was impressed with their methods and safeguards, they work pretty hard not to entice or initiate and they run their IM through a proxy logger to prevent a rogue volunteer from making stuff up. They post the chat logs so you can decide for yourself.