It's an interesting question that can probably only be answered fully by the AHJ (authority having jurisdiction) , which in your case would be the Colorado Division of Water Resources.
I do have a couple of comments on the situation though. From what I could tell about your neighbor's water diversion project, it would have been a major undertaking involving a backhoe and a pit (pits) deeper than the depth of the basement, or at least comparable depth. He would definitely have to obtain a permit, clear it with utilities etc. I just don't see how the local muni department dealing with permits would give the permit if the project was not legal under the AHJ. It is simply possible that, having dealt with overflowing sump before, they were simply better prepared this time around - a more powerful sump pump or discharge hoses extended far enough is perhaps all it took to prevent the basement flooding.
I did look at the regulations posted on Colorado DWR website (which obviously does not make me a local CO water resources expert) but all the regulations I could see related to residential construction seem to concern with wells and basically the concept of <strong>taking water</strong> from underground, not in any way with <strong>diverting water</strong> which is still underground. I think it's plausible that the diversion project you describe is perfectly legal. I still don't know how you might miss the backhoe and all the rest of the activity around a considerable by residential standards earth moving project.