Just because it happens doesn't mean it's right. Yes companies drag out payment and make you jump through hoops to get paid (the you here is a hypothetical freelancer).

The reason they do this is to hold on to your money as long as possible with the outside hope that you'll just go away and they get away with theft.

It's bad enough with larger companies where the people you're working with may not actually be the people who are writing the checks, but at a small company like this it is unacceptable.

Assuming the story is true, the CEO agreed to pay then decided that she didn't want to pay anymore. To accomplish this she's doing her best to get the designer to give up and go away.

How is this acceptable behavior? Again I realize it's common, but it's flat out dishonorable.

For once, I sort of agree with you. But I chalk it up to inexperience, not malice. It sounds like the OP was intimidated by the (probably meant to be tongue-in-cheek) referral to the "legal department, and genuinely doesn't know what to do.

And, it's one thing to have a client drag their heels on a bill, it's quite another for a client to say, "No, we won't pay that, talk to legal if you have a problem with that." The former is a good opportunity to persistently invoice, the later is a good opportunity to explore the small claims court system.