The Great Yazoo Fraud
Real estate speculation; aggressive lobbyists closely allied with crooked and self-serving politicians; insider deals tacked on as riders to popular legislation; intense scrutiny by the press; public outrage; political downfall; and the inevitable government bailout.
While this might sound like something ripped from today’s headlines, it actually happened more than 200 years ago during the Great Yazoo Fraud. One writer described the sequence of events as “an ugly and notorious drama, marked by corruption and base passions;” another as “a conspiracy of the darkest character and a deliberate villainy.”
Simply put, the Yazoo Fraud was an almost-successful attempt by a group of well-connected speculators to purchase millions of acres from the state of Georgia for scarcely more than a cent an acre. The resulting pubic outrage forever changed the boundaries of the state and continued to echo through the political and legal landscape of post-Colonial America for three quarters of a century.
Look West
By 1787, Georgia’s boundaries were reasonably well established. To the north, the border with Tennessee and North Carolina set at the 35th parallel was accepted, if not yet fully mapped. To the south, the 31st parallel (today marking the line between Alabama and Florida) was recognized, but again, unmarked. The Mississippi River was undisputed as Georgia’s western boundary dating back to 1763 in the colonial era.
The 1783 Treaty of Paris that formally ended the American Revolution ceded Florida back to its previous owner, Spain. The Spanish, based on earlier British claims, asserted ownership to a large swath of land east of the Mississippi River and north as far as the mouth of the Yazoo River, leaving ownership of this part of Georgia in international dispute. To add to the confusion, Native Americans occupied this region and claimed ownership of essentially all the land in what is now the states of Alabama and Mississippi. 
Fortunes could be made from the vast fertile soils and untapped resources in this new land. Speculation—often based on questionable claims of title and uncertain deeds—was common. By 1787 Georgia and North Carolina were the only states that had not ceded their western lands to the Federal government, and hence were squarely in the sights of men eager to reap quick riches from the buying and selling of these unexplored areas.
There were, however, a few technical problems. In addition to the issue of disputed ownership, Article I of the new Constitution specifically reserved to Congress the right to regulate commerce “with foreign nations, and among the several states, and with the Indian tribes.” The few hardy settlers who attempted to establish themselves in Georgia’s western lands were frequently harassed and sometimes killed by local Indians. Despite this, in 1785 the Georgia legislature established Bourbon County, which encompassed a large area around the modern city of Natchez on the Mississippi River. This was done in large part to cement the state’s claim to the area, but by attempting to settle lands claimed both by Native Americans and a foreign power, Georgia’s actions appeared to conflict with Federal sovereignty.
Whatever the benefit, the costs of settlement and of suppressing warring tribes weighed heavily on the state budget. In 1788, the legislature dissolved Bourbon County and offered to sell part of Georgia’s western lands to the United States for the sum of $171,428, the amount expended by the state on Indian wars. Congress, responding with an “all or nothing” resolution, rejected the proposal primarily because it called for recognition of the remaining western lands as belonging to Georgia.
The First Yazoo Act
Land speculators formed three separate companies to acquire large tracts in Georgia’s vast western area, planning to divide, develop and resell their purchases for a quick profit. The land in question was in some proximity to the Yazoo River (which in Indian language is said to mean “River of Death”), and the companies took the names South Carolina Yazoo Land Company, Tennessee Land Company, and Virginia Yazoo Land Company. The shareholders of these companies were, for the most part, non-Georgians. They ran the gamut from swindlers to prominent patriots, including Patrick Henry who was head of the Virginia Yazoo Company.
In November 1789, the three companies petitioned the Georgia legislature to buy an estimated 15.5 million acres in what is now Mississippi and Alabama for $207,850, or about 1.34 cents per acre. (The surveyed area was closer to 25.4 million acres, making the true offer about 0.8 cents per acre.) Their proposal called for the land to be sold with no money down and the balance due in two years, giving them time to resell the land at a significant profit.
A number of Georgia residents, apparently seeing this attractive deal going to out-of-staters, formed the Georgia Yazoo Company and offered nearly triple the price tendered by the other three companies. The Georgia legislature ignored the higher offer, however, and sold the land to the original applicants just nine days after receiving the first proposal. Governor Telfair duly signed the legislation over the strident objections of both the legislators opposed to the act and the citizens who had formed the Georgia Yazoo Company. Despite the allegations of fraud the act became law on December 21, 1789.
Word of the sale of Georgia’s western lands quickly reached President George Washington in Philadelphia. He was concerned because Indian claims in the region had not been settled, because of the stench of corruption, and because the situation threatened to spiral out of control.
President Washington and the American government were attempting to convince Spain to relinquish her claims in the Yazoo region when the three companies made their purchase from Georgia. James O’Fallon, one of the principles of the South Carolina Yazoo Company, was in contact with General James Wilkinson (for whom Georgia’s Wilkinson County is named). Wilkinson, who had served as a military officer in the Revolution, had secretly sworn allegiance to Spain, hoping to establish an independent republic in the Kentucky territory. In similar fashion, O’Fallon sought the protection and support of Spain for his company’s claim in the Yazoo region should the fledgling American republic fail. O’Fallon even planned to raise a private army, nominally for the protection of settlers but conceivably one that might be turned against American
authority. Secretary of State Thomas Jefferson issued a sternly worded proclamation threatening arrest of O’Fallon, who prudently backed away from his plans.
The furor caused by the 1789 sale led to a unique countermeasure. When the three Yazoo land companies tried to pay their debts to Georgia, the state treasurer refused to accept the tender of devalued paper currency and other bills of credit. The companies were unwilling or unable to pay with specie (gold or silver coins), so the state declined to deliver deeds to the land and effectively nullified the sale.
The Second Yazoo Act
Despite the negative outcome of the 1789 attempt, ingenious men in search of a profit are not easily dissuaded. In November 1794 a group of four newly formed companies again petitioned the Georgia Legislature for the right to purchase millions of acres in the western part of the state. The Georgia Company, The Georgia Mississippi Company, The Tennessee Company and the Upper Mississippi Company were composed of some individuals from the 1789 debacle as well as many newcomers. They were determined not to repeat the mistakes made in the earlier attempt. Notwithstanding the objections of the Federal Government and titular claims by Spain and the Indians, a joint legislative committee gave a positive report to the proposal. 
Once again, a late-forming group (The Georgia Union Company) offered to pay significantly more than the original four companies had offered for some of the lands, but the committee inexplicably rejected the offer. The legislature voted in favor of the first proposal and sent it to Governor George Matthews for his signature. The Governor vetoed the bill, citing seven primary reasons including his assessment that the price was inadequate, that the bids were non-competitive, and the amount of land being purchased was so large that the companies would operate as monopolies.
The authors of the bill authorizing the sale of land were not to be easily defeated. They renamed it and appended it to a popular bill authorizing payment to Georgia veterans of the American Revolution. Titled “An Act Supplementary to an Act,” this bill authorized the sale of 21.75 million acres to the four companies for the sum of $500,000. Once again, the putative and actual acreages were starkly different. The property involved was closer to 35 million acres, an area approximately the size of England, Scotland and Wales combined, making the effective price 1.43 cents per acre.
To avoid the mistakes of 1789, the purchasers were to pay 20% down once the governor signed the bill, and the balance in specie or approved warrants by November 1795. The state was to provide the purchasers with full title. The House of Representatives and the Senate, sitting in the temporary capital of Augusta, passed the Act in early January 1795. Although he had vetoed the same bill just weeks before, Governor Matthews signed the Act and it became law. The companies made the required down payments and promptly set about reselling their newly purchased lands to other eager investors.
Robbery!
Public reaction was swift and decisive when word spread of why the legislature had so readily endorsed the bill. James Gunn, one of Georgia’s Senators, and James Wilson of Pennsylvania, a signer of the Declaration of Independence and a Justice of the United States Supreme Court, had persuaded many members of the legislature to lend their vote and support. Despite their public offices of trust, both men aggressively sought to win votes for the land sale, most often by illegal or unethical means. As would later be revealed in testimony before the legislature, 28 of the 29 members of the Georgia legislature who voted in favor of the bill had received bribes. Some were offered and accepted cash or other favors; most were given shares in the Yazoo land companies at little or no cost.
In the small cities and still-rural county seats of the state, public outrage produced formal condemnations from grand juries in all but two of Georgia’s counties. Georgia’s other United States Senator, James Jackson, resigned his seat to return home and lead the fight to repeal what had become known popularly as the “Yazoo Act.”
As one of the Georgia’s Senators, Jackson was offered and refused generous bribes to lend his support to the proposed land sale. After its passage, he stirred public opinion by a series of newspaper articles written under the name of “Scillius” that “calmly and learnedly” condemned the Act and the enormity of its effects on the State. On his resignation from the Senate, he accepted the nomination to represent Chatham County in the Georgia Legislature so he could continue his fight for justice.
The newspapers of the day (of which the Augusta Chronicle is a good example) were full of signed and unsigned letters decrying the Yazoo Act as “robbery” and “obtained by fraud, collusion and corruption.” By the time the newly elected legislature convened in the new capital city of Louisville in January 1796, there was an overwhelming sense that the land sale must be reversed.
Public outrage did little to interfere with the business plans of the new landowners. They paid the balances due on their purchases and were busy reselling interests in Georgia’s western lands. Events elsewhere had conspired to increase the value of their claims. In October 1795 under the Treaty of San Lorenzo, Spain had relinquished her claims to those lands north of the 31st parallel, clearing titles of this impediment.
Undoing the Deed
As the lawmakers assembled, Governor Matthews sent them a message defending his signing of the Yazoo Act. It fell on deaf ears. His term was expiring and Jared Irwin, an anti-Yazoo legislator from Washington County, was elected Governor. A committee was established to investigate the validity and constitutionality of the Yazoo Act and given the right to subpoena witnesses and documents. James Jackson, as one of the most prominent opponents of the Act, was its chairman. At a series of hearings witness after witness confirmed the widespread bribery and corruption that facilitated its passage.
On January 22, 1796 the legislative committee charged with investigating the Yazoo Act reported “they are compelled to declare, that the fraud, corruption, and collusion by which the said act was obtained, and the unconstitutionality of the same, evinces the utmost depravity in the majority of the late Legislature.” The committee urged that the Act be declared void, and that it be expunged “from the face of the public record.”
The committee then introduced the Rescinding Act, which, after discussion and some modification passed overwhelmingly on February 13, 1796. This bill directed that the records of the Yazoo Act “be expunged from the faces and indexes of the books of record of the state, and that enrolled law or usurped act shall then be publicly burnt, in order that no trace of so unconstitutional, vile and fraudulent a transaction, other than the infamy attached to it by this law, shall remain in the public offices thereof.” The state treasurer was directed to return to the purchasers any of the sales proceeds then in state coffers, at the time about $400,000.
On February 15, 1796, in a ritual prescribed by the Rescinding Act, the Yazoo Fraud papers were put to torch by the gathered legislators on the grounds of the State House in Louisville. Reports claimed that the flame that consumed the documents was kindled by “fire from Heaven” by use of a magnifying glass to focus the sun’s rays. Although most historians seem to consider this an apocryphal tale, a contemporary note in the Augusta Chronicle appears to confirm the origin of the flame. Accurate or not, the image of the burning of the Yazoo Fraud papers has firmly entrenched itself in Georgia history. 
Aftermath
Whatever the plans of the Georgia legislature, the speculators—now in apparent legal possession of the title to the Yazoo lands—were not deterred. By the time the Rescinding Act was signed into law, most of the shares in the land companies had been resold for a profit. In a somewhat ironic twist, on the same day the Rescinding Act was passed, the Georgia Mississippi Company closed the sale of its entire holdings for more than a million dollars, a 700% profit over the purchase price paid a year earlier. Although the resold shares of the companies were widely distributed, a majority were sold in Boston and New England. The slowness with which news traveled in those days shielded many buyers from knowledge of the anger of the citizens of Georgia at this “usurpation” of the state’s land.
Over the ensuing months and years many lawsuits and claims were filed against by Yazoo-area landowners against the State of Georgia. A 1793 United States Supreme Court decision, Chisholm v. Georgia, confirmed the rights of a citizen of one state to sue the government of another state in Federal Court. In response, the states ratified the 11th Amendment to the Constitution, the first after the Bill of Rights, in February 1795, effectively forbidding citizens from suing state governments.
This situation led to the landmark case of Fletcher v. Peck, decided by the Supreme Court in 1810. John Peck of Massachusetts had sold 15,000 acres he acquired under the Yazoo Act to Robert Fletcher of New Hampshire. Peck gave Fletcher a warranty deed based on the original title delivered by the State of Georgia. In June 1803 Fletcher sued Peck in Federal Court, citing a defective title and demanding return of his money. Peck was represented by John Quincy Adams, the future President, and the Supreme Court ruled in his favor, declaring Georgia’s Rescinding Act unconstitutional because it violated the Contract Clause in Article I of the Constitution.
By this time, the Supreme Court’s decision carried little significance for the State of Georgia, which ultimately might have been required to warrant the title to Peck’s land. In the months that followed the passage of the Rescinding Act in 1796, the state began negotiations to sell all of its western lands to the Federal Government. Georgia’s prime purpose was to extricate itself from the legal mess and liability claims created by the Acts of 1795 and 1796. After several years of negotiation an agreement was reached in 1802, and Georgia transferred to the United States title to the area that later became Alabama and Mississippi. Part of the agreement specified the national government would assume the task and liability of settling the Yazoo land claims.
The issue smoldered in Congress for more than a decade until 1814, when a bill passed appropriating $5 million dollars to settle all outstanding Yazoo Act claims. Money to fund the settlements was to come from the sale of land in the territory. These settlements were to be paid to holders of the worthless deeds from Georgia. According to one source, however, by 1814 the speculators had already made profits of more than $3.5 million dollars. Of the $5 million appropriated by Congress, $4,282,151.12½ was ultimately paid, so few “victims” of the land fraud suffered any significant financial loss.
Congress’s bailout did not stop the lawsuits. The last to be settled involved the New England Land Company, which had bought the entire holdings of the Georgia Mississippi Company. Its lawsuit against the United States government was finally dismissed in October 1864, some 75 years after the first attempt by speculators to buy the Yazoo lands.
Today, only a few of Georgia’s citizens have heard of the Great Yazoo Fraud, and even fewer know the details of the sordid matter. Other scandals, some greater, some not, have relegated it to ancient history. The players and the details may change, but one factor remains constant: The combination of greed and government is a potent recipe for disaster.
Sources
One of the best sources of information about the Great Yazoo Land Fraud is a Master’s Thesis by Helen Clark titled “The Yazoo Land Fraud.” Written in 1948 in partial satisfaction of her degree requirements at George Washington University, the original is in the possession of the Jefferson County Historical Society in Louisville, Georgia.
Georgia’s Bicentennial in 1933 produced several publications that reviewed the facts of the Yazoo Fraud in detail. One excellent source from the 1930s is The American Historical Society’s 1938 multi-volume publication, The Story of Georgia by Walter G. Cooper. It reproduces the text of the 1795 Yazoo Act and the 1796 Rescinding Act, as well as contemporary and historic commentary.
An interesting account of the Yazoo Fraud is contained in A History of Georgia, published in 1859 by William B. Stevens. It can be read on-line in its entirety on Google Book Search (https://books.google.com).
For readers interested in gauging contemporary public opinion and reaction to the 1795 Yazoo Act, the Augusta Chronicle maintains extensive online archives dating back to the 1780s which can be accessed (for a fee) at augustaarchives.com.
All quotes in this article were drawn from the above sources.
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