June 1 (Bloomberg) -- The U.S. Securities and Exchange Commission’s inspector general reviewed e-mails from more than two dozen employees in an investigation of the agency’s failure to detect Bernard Madoff’s $65 billion Ponzi scheme.

The Office of Inspector General, led by H. David Kotz, ordered the SEC to turn over communications from at least 27 employees who “had involvement” with examinations and inspections of Madoff’s investment and securities firm, Kotz wrote to Congress in a report posted today on the agency’s Web site. Kotz’s office has “substantially reviewed” more than 1.3 million e-mails, the document said.

Former SEC Chairman Christopher Cox ordered the review in December after saying the agency failed to catch Madoff for at least a decade amid “credible and specific allegations” that he was defrauding investors. Kotz’s findings may lead to changes at the SEC as Congress considers boosting its resources or handing agency authorities over to other regulators.

Kotz, who said his investigation should be completed in August, wrote that he ordered e-mail providers to preserve the personal accounts of “several individuals.” He hired a consulting firm with expertise in forensic accounting to review reports produced by the Office of Compliance Inspections and Examinations. The examinations office inspected Madoff’s firm seven times in 11 years, the report said.

As of March 31, Kotz said his office interviewed 44 witnesses and planned “numerous, additional” interviews in April and May. His report didn’t disclose information disclosed in the interviews or e-mail reviews.

Madoff, 71, pleaded guilty in March to a massive fraud in which he paid off old investors with money raised from new clients. He will be sentenced this month and may face as many as 150 years in prison.

To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.

Last Updated: June 1, 2009 15:30 EDT