How should I credit a plagiarized paper in open source code? Background:

In order to form a body of work to show to prospective employers, I am implementing a genetic solver for the weighted maximum independent set problem. The code will be available on github under an open-source license. While researching the problem, I came across this paper. However, I found it to be lacking justification for many of its decisions. Attempting to gain a deeper understanding of the topic, I went through other papers that it cited as references. I quickly found Beasley and Chu's A Genetic Algorithm for the Set Covering Problem which provides a much clearer explanation of many of the same issues.

In fact, upon closer reading, I realized that many paragraphs from the first paper were copied--almost word for word--from the second one (e.g. the last paragraph in section 3.6 from Beasley and Chu is identical to the first paragraph on page 8 of the other paper). Perhaps most damning is the reproduction of the heuristic-feasibility operator with absolutely no attribution to the original authors. After discovering this, I stopped referencing the derivative paper (which, by the way, greatly sped up my development process). 

Question:

First, is the first paper guilty of plagiarism? If so, how much of this should I discuss in the code and the project summary on github? Should I even mention the derivative paper? I don't want to slander the author in a public forum--although this case seems pretty straightforward--and I certainly don't want to commit plagiarism, but I feel some obligation to the original authors to point people to their work instead of the derivative one.
I suggest you to be very careful to label the first paper a plagiarism, unless you are 100% sure that there are areas of a word-for-word equivalence with the original paper(s) without credit for original authors. Having said that, I noticed that the first paper's author cite the second one (authored by Beasley and Chu) - and another one by the same authors - as well as clearly state that the same (or similar) approach has already been used by Beasley and Chu (references #22 and #23), so it seems that some credit has been given (which is not to say that some is enough).

In regard to which paper(s) to reference, I would say that it depends on the following two aspects: 1) if the second paper is indeed a case of plagiarism, then it certainly doesn't make sense to cite it; 2) if it is not, then the decision should be made, based on whether there are distinctly different sets of ideas in both papers and whether you have used both sets or one.