Who are you looking to report them to?

While I understand your frustration, there is no agency for you to report this. And it doesn't appear that they have done anything illegal, or implicitly "wrong" or "unethical".

The best you can hope for is to spread the word yourself.

If they're abusing the nofollow tags for the benefit of their own PageRank, you could always try informing Google. That's explicitly *not* how Google wants that tag used, but I'm guessing it would have to be a really clear PR manipulation for them to actually act on it (plus you'd need to be lucky and catch the right quality-control guy on the right day.)

If you paid them for a link and the amount you paid them is not worth it if Google won't recognize the link, then you could try asking them for your money back. If it's a free directory then why worry about it, you may still get a few referrals from them.

let's see: you tried to buy a link to fool google, and got fooled yourself, now you want to report them? Let it go buddy, it happens.