Daniel Mudd, the former CEO of Fannie Mae, will take a leave of absence as CEO of Fortress Investment Group in the wake of a Securities and Exchange Commission (SEC) lawsuit filed last week.
I have requested a leave of absence from my position as chief executive officer to ensure that any time or attention I need to focus on matters outside of Fortress will not affect the business or operations of the company, Mudd said in a statement.
Randal Nardone, a co-founder of Fortress, will be interim CEO of the investment manager, which oversees around $43 billion in assets as of Sept. 30.
Fortress is very well-positioned today, and across our company, we remain single-mindedly focused on managing our investment funds and capitalizing on opportunities to create value for our investors, said Nardone in a statement. We look forward to Dan's return in the hope that matters are resolved favorably and expeditiously.
Mudd was named along with five other former executives of Fannie and Freddie Mac in the SEC suit, which alleges that they misled investors regarding the mortgage companies' exposure to subprime losses.
He said in a statement last week that he will fight the charges.
“This is a lawsuit that should never have been brought in the United States of America, he said. Every piece of material data about loans held by Fannie Mae was known to the United States government and to the investing public. The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice.
Mudd served at Fannie Mae during the time when the mortgage giant loosened underwriting standards and began guaranteeing subprime mortgages. He joined in 2000 as COO and became CEO in 2004 after the departure of Franklin Raines, the previous chief executive. He was ousted in September 2008 after the federal government takeover of Fannie and Freddie.
The firms, which still guarantee the majority of residential mortgages, have cost U.S. taxpayers over $150 billion since entering government conservatorship.
Fannie and Freddie aren't named in the SEC suit and said they would cooperate with the investigation. But the firms, along with their regulator, the Federal Housing Finance Agency (FHFA), are involved in recent lawsuits with the California attoreny general and the city of Chicago over vacant properties disputes.
Shares of Fortress were trading around $3.36 on Wednesday, down 0.30 percent.