Georgia continued to claim territory all the way to the Mississippi River. For various reasons, the state was loath to give up its interest in these so-called Yazoo Lands, corresponding to the larger part of the present-day states of Mississippi and Alabama. Not least because of money. Land developers were eager to acquire large chunks of the country, their guiding principle being: bribe high, pay low.
In 1794, four companies, set up especially for the purpose, paid half a million dollars for about 40 million acres of land. Even taking into account all the bribes — another half a million — that was a ridiculously low amount: four acres to a dollar.
Infuriated by the deal, Georgians booted out the legislators who had their palms greased to approve the Yazoo Act, by which Georgia had sold all that land on the cheap. In 1795, a new state legislature voted a Rescinding Act, overturning the sale. All extant copies of the original Act were collected and burned at high noon on the grounds of the state capitol under construction, then in Louisville. (One copy escaped destruction — the one sent to President Washington).
But that was far from the end of the unpleasantries. In fact, this is where the actual scandal started. For the land companies did not admit defeat. They continued printing bonds that were being traded and sold on the financial markets of New York, Boston, and Philadelphia, raking in tidy profits.
Thousands of bond buyers acquired a stake in the Yazoo Lands. Eventually, though, the market smelled a rat. Investors started to worry: had they thrown away their money on a fraudulent land scheme?
Georgia paid back some of the duped buyers, but unable to handle the escalating scale of the scandal, the state eventually did surrender its claims to the Yazoo Lands to the federal government. Under the so-called Compact of 1802, the U.S. paid Georgia $1.25 million, took over any remaining liability for the Yazoo Lands, and promised to rid Georgia of any remaining Native American land claims.
So, the duped investors could now sue the federal government instead of Georgia. The land companies, for their part, wanted the U.S. to uphold their claims, which they continued to consider legal and valid. Who was right?
In 1810, the case reached the highest court in the land. Pronouncing on Fletcher v. Peck, the Supreme Court ruled that the Rescinding Act was unconstitutional and the original land deals remained legal. For although those deals were corrupt and not in the best interest of Georgians, the contracts were made by the Georgia legislature, which had the authority to do so. The Supreme Court ordered the U.S. government to pay out $4.5 million in compensation to the claimants.