I have seen this as well.  They also buy a lot of Amulets of Haste (or whatever the +2 initiative trinkets are called).  I actually have screenshots of it on my home computer.  I'll upload them when I get home if I remember.

What's worse is that they have all those horses and wargs, and they don't equip any of them.

This has been an ongoing issue since the early stages of the first beta. I think it might be an equip issue since the sovereigns never have the duplicate items equipped. On one hand, its a bug, but on the other hand since you don't get any money or any remaining cities when the enemy surrenders, its a nice cash bonus when you sell off the duplicates. 

However, one thing I would like fixed in 1.4 is when you are selling items in the shop, the selected item is highlighed with a glowing box around it so you know exactly what item you are selling. Too often in my haste I've accidently sold something that I didn't intend to sell. It would be great to have a 1 transaction undo button as well.