Technically, you overheard correct. The third sentence is the one that gives them Stealth, and as the
FAQ is written now, Imperial Guard Camo Cloaks give +1 to cover saves AND the Stealth special rule.
I would never let something like this fly. Ever. It's an obvious typo. Every group has their own dynamic, but I would be very put out if a
TO ever let that stand.
And then I would go out of the way (even throwing the game if necessary) to heavy flamer the crap out of that squad!