If you're wondering what happens when a consulting firm fails to protect the tax records of billionaires and presidents, Treasury Secretary Scott Bessent just gave us the answer: you lose your contracts and your stock craters.

Booz Allen Hamilton saw its share price drop more than 10% on Monday after Bessent announced he'd canceled all 31 of the firm's Treasury Department contracts, totaling $4.8 million in annual spending and $21 million in total obligations. This isn't a slap on the wrist—it's a full-blown severing of ties.

The reason? Between 2018 and 2020, Booz Allen employee Charles Edward Littlejohn stole and leaked the confidential tax returns of hundreds of thousands of taxpayers, including Donald Trump, Jeff Bezos, and Elon Musk. The data breach affected about 406,000 taxpayers, according to the IRS.

"President Trump has entrusted his cabinet to root out waste, fraud, and abuse, and canceling these contracts is an essential step to increasing Americans' trust in government," Bessent said in a statement. Translation: if you can't keep sensitive data safe, we're done.

Here's what should concern investors: Booz Allen had access to IRS data through its contracts and failed to implement adequate safeguards. That's not a technical glitch—that's a fundamental breakdown in security protocols. For a company that markets itself as a trusted government partner, this is reputational damage that won't heal quickly.

The market's reaction tells you everything. A 10% drop isn't just about $21 million in lost contracts—it's about what comes next. Will other agencies follow Treasury's lead? Will private sector clients start asking harder questions about Booz Allen's data security?

This case also raises a bigger question about contractor accountability. Littlejohn was eventually caught and prosecuted, but the damage was done. According to CNBC, the breach exposed confidential information for years before anyone noticed.

For regular investors, the lesson here is simple: vendor risk is real risk. Whether it's a consulting firm handling tax data or a tech company managing user information, security failures have consequences. And those consequences increasingly show up in stock prices.

Booz Allen will survive this—they're a $42 billion company with deep government relationships. But trust, once broken, is expensive to rebuild. Just ask their shareholders who watched 10% of their investment evaporate in a single day.