Yazoo Fraud

Yazoo Fraud, term applied to the transaction of 1795 by which the legislature of the state of Georgia granted a large portion of the state's western territory (now part of Mississippi and Alabama) chiefly to four land companies. The latter were called the Yazoo companies, after the Yazoo River, which crosses a section of the deeded region. The consideration was $500,000, and the area involved was about 14 million hectares (about 35 million acres). It was believed that the members of the legislature voting for the sale had been bribed or were shareholders in the companies. In 1796 a newly elected legislature repudiated the transaction and burned the records pertaining to it; the repudiation was incorporated in the state constitution of 1798.

In 1802 Georgia ceded the disputed territory to the federal government. The shareholders continued to press their claims, and their case finally reached the U.S. Supreme Court. In 1810 the Court ruled in favor of the claimants, holding that the sale, although consummated in fraud, could not be invalidated because such action would impair the obligation of a contract. In 1814 Congress approved a final settlement of more than $4 million to the speculators.