Treasury scraps Booz Allen contracts, citing ex-employee who leaked tax returns

The Treasury Department said Monday that it would cancel all of its contracts with Booz Allen Hamilton, linking the decision to a former employee now serving prison time for leaking tax returns.

Treasury Secretary Scott Bessent said in a three-paragraph press release that the agency’s 31 contracts with Booz Allen Hamilton — worth $21 million in total obligations and $4.8 million in annual spending — would be scrapped as part of President Donald Trump’s push to “root out waste, fraud and abuse.”

“Canceling these contracts is an essential step to increasing Americans’ trust in government,” Bessent said. “Booz Allen failed to implement adequate safeguards to protect sensitive data, including the confidential taxpayer information it had access to through its contracts with the Internal Revenue Service.”

A Booz spokesperson said in an email to FedScoop that the firm was “surprised by this announcement” — especially given Treasury’s reasoning regarding Charles Edward Littlejohn, who between 2018 and 2020 leaked the confidential tax returns and information of hundreds of thousands of taxpayers.

“Booz Allen fully supported the U.S. government in its investigation, and the government expressed gratitude for our assistance, which led to Littlejohn’s prosecution,” the Booz spokesperson said. “We were surprised by this announcement and look forward to discussing this matter with Treasury.”

Per the Treasury release, the IRS determined that the data breach affected roughly 406,000 taxpayers. Littlejohn, who was sentenced to five years in prison last January after pleading guilty to one count of disclosing tax return information without authorization, leaked the returns of Trump, Elon Musk and other wealthy individuals to a pair of news organizations. 

“We have consistently condemned in the strongest possible terms the actions of Charles Littlejohn, who was active with the company years ago,” the Booz spokesperson said. “Booz Allen has zero tolerance for violations of the law and operates under the highest ethical and professional guidelines. When Littlejohn’s criminal conduct occurred more than five years ago, it was on government systems, not Booz Allen systems. Booz Allen stores no taxpayer data on its systems and has no ability to monitor activity on government networks.”

Littlejohn’s case has been cited multiple times over the past year in congressional hearings on data security. During a House Ways and Means Oversight Subcommittee hearing last February, Republicans criticized Democratic concerns about possible DOGE security lapses given Littlejohn’s leaks, though Democrats such as Rep. Tom Suozzi of New York said the punishment was warranted and anyone who violates Internal Revenue Code 6103 by taking private data and sharing it with others “should be prosecuted to the full extent of the law.”

Four months later, Bessent appeared before a Senate Appropriations Financial Services and General Government Subcommittee to defend DOGE’s work in IRS systems and again raise data privacy concerns by bringing up Littlejohn.

“I can’t remember whether he was fined $5,000 or $10,000. We do not know the terms of his plea deal,” Bessent said. “But I would support an increase in both the monetary penalty and the jail time.”