A longtime

Liberty Media

(L) - Get Report

shareholder ended up staying only briefly on its board.

The media and entertainment company controlled by onetime cable mogul John Malone disclosed in a filing Tuesday that board member Kim Magness, a major shareholder of Liberty and the son of Malone mentor Bob Magness, resigned from the board on March 12.

Magness, who joined the board only six months ago, was arrested March 7 on suspicion of narcotics possession, according to Denver press reports. The 50-year-old Magness was found by a police in a hotel room with cocaine, marijuana, hashish and the painkiller Oxycontin, police said.

A message left Tuesday at the office of Magness' attorney was not returned. A Liberty spokesman declined to comment.

Separately, Liberty on Tuesday reported strong bottom-line growth at Discovery Communications, the programming giant in which it holds a nearly 50% stake. Liberty's Starz Encore premium channel service reported fourth-quarter earnings before interest, taxes, depreciation and amortization that met analysts' expectations despite an ongoing dispute with

Comcast

(CMCSA) - Get Report

.

Liberty's shares rose 29 cents Tuesday to close at $10.09.

Magness' departure calls attention to the corporate governance of Liberty, which -- as has been common practice among publicly traded cable-TV companies from Comcast to

Adelphia Communications

(ADELQ)

-- remains under the firm control of its founder and/or founding family, despite its publicly traded status.

As

TheStreet.com

noted last fall,

Kim Magness has a tangled relationship with Malone, who for many years ran Tele-Communications Inc., the cable-TV system giant founded by Bob Magness. After Bob Magness' death in 1996, Malone arranged for TCI to buy back TCI shares held in the Magness estate -- a deal that provoked a lawsuit from Kim Magness. As part of the settlement of that lawsuit, Kim Magness granted Malone an irrevocable proxy to vote Magness' shares in Liberty.

Meanwhile, the three independent directors on Liberty's audit committee include Donne Fisher, a longtime TCI executive, an executor of Bob Magness' estate and the target of Kim Magness' lawsuit.

Another independent director is Paul Gould, a banker at Allen & Co. His firm, says Liberty, has worked for some of its subsidiaries; Gould was also a longtime adviser to TCI and a frequent sailing buddy of Malone's, according to the Malone biography

Cable Cowboy.

Waiting

The disclosures come as Liberty investors await word of what the wheeler-dealer Malone might do with a

chunk of change he's scrounging up by selling bonds backed by part of his stake in

AOL Time Warner

(AOL)

.

Outsiders have speculated that Liberty is readying at least one major transaction: purchasing DirecTV operator

Hughes Electronics

( GMH), acquiring the stake in home shopping network QVC owned by partner Comcast, or buying entertainment assets controlled by

Vivendi

(V) - Get Report

. On a conference call with analysts Tuesday, Liberty CEO Dob Bennett acknowledged that the company could be making at least one major transaction. "At the moment, we have a couple of large transactions in front of us," he said, which could "potentially affect the look and feel and capacity of the company going forward."

In the meantime, Liberty has continued a program of buying back its shares. The company bought 25.7 million shares last year for an average price of roughly $10.93. Bennett said the company bought an additional 17 million shares in the first quarter of the year, a time when its stock has ranged from $8.45 to $10.38.

Liberty's shares, which hit $30 three years ago, are trading at 1998 levels.

Challenging

For the fourth quarter ended Dec. 31, Discovery reported revenue of $546 million, up 20% from pro forma figures for the fourth quarter of 2001. Ebitda, or operating cash flow, rose 42%. For the year, revenue rose nearly 10% to $1.7 billion, while operating cash flow rose 52% to $379 million. U.S. ad sales showed particularly strong performance compared to 2001's "challenging marketplace," says Liberty.

For full-year 2003, Liberty forecasts percentage revenue growth in the low teens for Discovery, with operating cash flow increasing 15% to 20%.

Liberty reported that its Starz Encore unit generated $371 million in ebitda for 2002, or $102 million in the fourth quarter. Merrill Lynch analyst Jessica Reif Cohen, for one, had estimated annual ebitda of $372 million for the unit. Liberty, in a legal tussle with Comcast over programming fees, said last week it had

cut the revenue Starz Encore was recognizing from Comcast in 2002 and 2003.

Assuming conservative revenue recognition from Comcast, Liberty forecasts 2003 revenue for Starz Encore that's even with 2002 or up in the low single digits. Operating cash flow will remain flat, says Liberty.

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