An IFR (Instrument Flight Rules) pilot in VMC (Visual Meteorological Conditions) is still responsible for looking out of the airplane. Even if the pilot was "under the hood" (wearing a view limiting device), the safety pilot (the guy in the other chair) should have ensured separation from the Cessna.
There was only one pilot in the F-16 (there are two seat trainer F-16s but AFAIK this was not one of them).
Also, you're basically making the same point as the article, except that (so the article conjectures) the military pilot didn't think he needed to look out for other aircraft because ATC was doing it for him.
My guess is this is going to end up in court.