Jan. 25 (Bloomberg) -- Fortress Investment Group LLC said Daniel Mudd resigned as chief executive officer and a director of the New York-based hedge fund and private-equity firm after a leave of absence to respond to a government lawsuit.

“I do not want the uncertainty associated with a leave of absence, on my part, to become a distraction for either Fortress or its investors, and thus, I have decided to resign,” Mudd said yesterday in a statement.

Randal Nardone, Fortress principal and co-founder, will continue to serve as interim CEO, according to the statement.

Mudd, formerly CEO of Fannie Mae, took a leave from Fortress on Dec. 21 to respond to allegations by the Securities and Exchange Commission. He and former Freddie Mac CEO Richard Syron were sued for understating by hundreds of billions of dollars the subprime loans held by the government-owned mortgage finance companies. Mudd denied the claim, saying the U.S. government and investors were aware of “every piece of material data about loans held by Fannie Mae.”

Tom Green, Syron’s attorney at Sidley Austin LLP in Washington, said in December there was “no uniform definition” of subprime in 2007 and that Freddie Mac included in its disclosure tables information detailing credit risks.

--Editors: Josh Friedman, Daniel Taub

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net