Yazoo Fraud

views updated Jun 27 2018

YAZOO FRAUD

YAZOO FRAUD. The Yazoo Fraud was one of the most spectacular and significant acts of land speculation in American history. In 1795 the Georgia legislature sold 35 million acres of its western lands, comprising the present states of Alabama and Mississippi, to four land companies for $500,000, or 1.5 cents an acre. The sale soon became a public scandal because nearly all the Georgia legislators who voted for the law had been bribed by agents of the land companies. In 1796 the newly elected Georgia legislature revoked the sale.

Georgia's repeal of the corrupt sale became a national political and legal issue for nearly twenty years. The land companies had quickly unloaded their dubious titles to speculators throughout the East. Many of these speculators, including leading politicians from both the Democratic-Republican and Federalist parties, organized themselves into the New England Mississippi Land Company and applied great pressure on the U.S. Congress and federal courts to award compensation for the land they claimed to have bought in good faith. In 1802 Georgia agreed to transfer its western lands to the United States for $1.25 million. But the Yazooists, as they were called, continued to push their campaign through a contrived legal case, Fletcher v. Peck (1810). This case eventually reached the U.S. Supreme Court, which ruled that the Georgia 1796 repeal act violated the contract clause of the Constitution of the United States. The legal doctrine of this decision helped to protect business interests from state regulatory actions until well into the twentieth century. Four years after the Fletcher decision, Congress enacted legislation providing $4.2 million to compensate the claimants, and the Yazoo land issue finally disappeared from the national scene.