It looks like it is somehow related to the farm account, because you repro only during augmentation (people picker calls the same method but as the application pool account).
Do you repro the issue if you run the same code in PowerShell as the farm account:
Do you repro the issue if you run the same code in PowerShell as the farm account:
[System.DirectoryServices.ActiveDirectory.Domain]::GetComputerDomain().GetDirectoryEntry()