In
1795, the
Georgia legislature passed an act allowing the sale of large holdings in the
Yazoo River country for $250,000 to four
land companies, following the widespread
bribery of most of the legislators. This land comprised most of present day
Mississippi and
Alabama.
The four companies, the Georgia, Mississippi, Upper Mississippi, and Tennessee companies, were betting that the treaty signed by Spain that year, accepting the current borders of Florida, would enhance the value of the land, making their bribery efforts worthwhile, and removing the threat of Spanish claims on the land.
They immediately began dividing the area into parcels and selling the lots. Within a year the corruption of the deal was discovered by investigators, and a newly elected legislature rescinded the act in 1796. The state then offered to refund the purchase price to the four companies, but the investors, lured by the newly increased value of the land, rejected payment, and pushed their claims.
In 1802, Georgia made a deal with the government of the United States, ceding all control of the land west of the Chattahoochee River to the federal government in return for $1,250,000. As part of the terms of this deal, the claimants remaining from the Yazoo deal were to receive either 5,000,000 acres of land, or the money received from the sale of this land. The claimants rejected this offer as well.
By now the Yazoo fraud was starting to become a thorn in the side of national political figures, and Congress obstinately denied any relief to the speculators.
In 1810, the U.S. Supreme Court, in Fletcher v. Peck, held that all claims were valid, as the Yazoo act of 1795 constituted a binding contract on the state of Georgia regardless of the corruption involved. This was the first court decision to declare a state legislative act unconstitutional. Stuck between a rock and a hard place, Congress was forced to negotiate, and the speculators were eventually awarded $4,000,000. Quite a profit.