Real Estate Fraud

REAL ESTATE AND LAND swindles have been the dark side of the important American aspiration of property ownership for all. While some schemes seem to emphasize the opportunity to speculate, to get rich for little investment, others target the average homeowner with the vision of a vacation or retirement paradise. Fraudulent deals have ranged from vacation land in Maine which appears to be solid ground only in the winter, to promises of prosperity in land surrounding the Hoover dam near Las Vegas, Nevada.

All of these schemes seem minor compared to perhaps the original American land fraud: the Yazoo lands of western Georgia, (now comprising the states of Alabama and Mississippi.) In 1789, members of the Georgia legislature authorized the sale of more than 25 million acres to three land companies for $237,580. Six years later they sold some 35 million acres to four more companies for $500,000, basically given away land for 1-1/2 cents an acre. The land companies sold shares in the land back to legislators, who stood to profit when promoters sold to northern investors. One of the victims was Robert Morris, signer of the Declaration of Independence. Even after a new legislature was voted in and rescinded the deal, the land companies[Page 667] continued to sell tracts to unsuspecting speculators in New England and the mid-Atlantic states. The problem passed to the U.S. government when Georgia ceded the land to the United States. Eventually, the Supreme Court found in favor of land holders, ruling that original land grants were valid contracts, and that the later attempt to rescind was in violation of constitutional protection of contracts. In 1814 shareholders were awarded $4.7 million. One author characterized this as a decision that “the land had been originally stolen fair and square.”