Is there any chance it was just a human thing- she rejected it but then thought about it and casually showed it to a publisher and that person liked it? Then she got back to the author again? Really I don't know how this all works, but I am wondering if something like that could happen. She changed her mind?
It doesn't matter, she had no right to show it to the publisher at all. What she could have done is get back in touch with the writer, let her know she'd thought of a pub that might be right for her manuscript after all, and ask if it was still available.
But, even then, agree to rep the book, but for submission to just that pub alone? You can't say, "I'll represent this book, but only to this publisher." It's the agent's job to get the best deal possible for the writer. The author should still run fast and far.
Can't see an upside to this one.