It is only a couple data points, but the story given was "major defense contractor" and there really are only a few of those.
At least as far as the US goes I've never heard of them awkwardly trying to get people to develop something for them in the manner described. In my experience they're very up front about what they do and aren't short on people willing to work for them.
Not to say the story was a lie, I don't know, but it sounds very unusual.
I don't know whether there's a common practice that's followed up and down all the org charts of all the employers.
I didn't disbelieve the article's story. It might've just, for example, been someone's pet project, with only budget to hire some co-op students and an inexperienced new-grad coder, to make a demo, to pitch for a real project/contract. Or to proof-of-concept a method, to possibly be properly designed and implemented by a real engineering team. Maybe they didn't think they needed experienced serious engineers with clearance for this compartmentalized exercise.
Another, maybe less-likely, possibility was something involving a cleanroom implementation as demonstration it was "obvious to first-year students". Or to find a plausibly alternate cleanroom implementation, by people who hadn't been tainted by knowledge of the encumbered one. Guessing not, but I did see something like this done at least once. I'd bumped into this affable young high school student, who was idling around in common areas of my lab, and was outgoing enough to strike up a conversation with random passerby me, and start telling me he was working on a project. It turned out a professor had tasked him to reinvent this one algorithm that was some alum grad student's thesis, which had been patented, and which the alum had been milking rather hard... and the professor didn't tell the high school student about the prior work.
I also once had a current PhD student hired as an intern, to apply very niche expertise towards a speculative new feature ("wouldn't it be great if we could do this cutting-edge thing in the new system"), and they were mostly successful, but the product ended up going a different direction. (The PhD student did OK: they then had understanding of a great, tricky real-world domain example, to guide research. A lot of research uses over-simplified examples of applications that they never had the opportunity to really understand.)
I did have a twinge while reading the article, wondering why it seemed like they were about to go into methods used by what sounded to my naive ear like a tracking/targeting component of a military system, but I would guess that they didn't spill any secret sauce beans.
At least as far as the US goes I've never heard of them awkwardly trying to get people to develop something for them in the manner described. In my experience they're very up front about what they do and aren't short on people willing to work for them.
Not to say the story was a lie, I don't know, but it sounds very unusual.