* SEC report says agency failed to probe properly
* Einhorn demands full report be released
BOSTON, March 23 (Reuters) - Hedge fund manager David Einhorn, who has been locked in a bitter fight with Allied Capital Corp (ALD.N) over the company's business tactics, on Tuesday asked U.S. financial regulators to release the full version of a report that probed allegations of wrongdoing at Allied.
The U.S. Securities and Exchange Commission's inspector general found that the agency had failed to properly investigate allegations of wrongdoing at the firm, including complaints from Einhorn, the Washington Post first reported on Tuesday.
Allied harmed investors even more because the SEC failed to act, Einhorn said on Tuesday. Now he wants the agency, which has faced sharp criticism for having missed the Madoff Ponzi scheme and other investment frauds, to show the public everything it has on the Allied case.
"We call upon the SEC to immediately release the non-redacted version of the report," Einhorn said. "The government-sanctioned culture of lawlessness that allowed this fraud to occur cannot continue."
Einhorn, who runs New York-based Greenlight Capital, started to bet against Allied Capital in 2002 by selling the company's shares short after saying that he thought the company was overvaluing its holdings.
SEC spokesman John Nester said, "We agree with each of the report's recommendations, have already implemented several of them and expect to complete the process in June."
The battle between Allied and Einhorn became intensely personal when the company acknowledged three years ago that it may have obtained Einhorn's phone records.
Einhorn said that someone impersonating his wife and using her Social Security number had directed the phone company to send copies of his home phone to an online account.
(Reporting by Svea Herbst-Bayliss; Editing by Richard Chang)