The only shame is to have none. -- Blaise Pascal

Almost anyone who works for a mutual fund firm will tell you that the industry is going through a collective dark night of the soul.

Ever since New York Attorney General Eliot Spitzer revealed the first batch of evidence of abusive trading of funds, most fund firms have turned self-reflective, examining their activity to determine if they were unwavering in their dedication to all fund investors.

However, among the firms that were knee-deep in problematic relationships with rapid-fire traders, one firm has been recalcitrant in the face of red flags, subpoenas and impending civil fraud charges: Invesco. The family of growth-oriented and sector funds, a unit of the United Kingdom's Amvescap ( AVZ), has aggressively defended its market-timing arrangements with several hedge funds as "consistent at all times with the best interests of Fund shareholders."

Spitzer's office and the Securities and Exchange Commission filed civil charges against Invesco and Chief Executive Raymond Cunningham on Tuesday, alleging that Invesco granted several hedge funds the ability to market-time. Published reports put the total amount of assets involved in the alleged wrongdoing at roughly $1 billion. TheStreet.com reported last week that Canary Capital Partners was among the hedge funds allowed to market-time Invesco's funds; Tuesday's New York Times put the tally of market-timers at 66.

Spitzer and the SEC haven't yet laid all their cards on the table and Invesco hasn't had the full opportunity to tell its side of the story, but the picture emerging so far hasn't been a pretty one. On Oct. 30, TheStreet.com reported that five Invesco funds turned up near the top of a list of funds with red flags for excessively high trading levels.

Since "all frequent trading harms a fund," according to Fund Democracy founder Mercer Bullard, if nothing else, the rapid-fire trading within these funds helped hoist the funds' expenses to the detriment of investors. Meanwhile, officials within Invesco were arguing over the potential harm of market-timers five years ago -- according to The Wall Street Journal, former manager Jerry Paul remembers telling senior managers in 1998 that "market-timing is not good for long-term shareholders."

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