Cable Mogul Agrees to Fine For Stock-Purchase Errors

Cable television tycoon John C. Malone has agreed to pay a $1.4 million penalty after federal regulators found that he failed to report purchases of stock in Silver Spring-based Discovery Communications, previously owned by his cable-television business Liberty Media.

The Federal Trade Commission yesterday announced in a civil complaint to the U.S. District Court for the District of Columbia that Malone violated pre-merger competition rules by buying Discovery stock in 2005 and again in 2008 without properly disclosing the transactions. Liberty Media owned a 50 percent stake in Discovery Communications before it was spun off to Liberty's shareholders in July 2005.

Malone has 30 days to pay the fine, which he agreed to do in a settlement with the FTC. Known for his aggressive business style, Malone brought the recording error voluntarily to the FTC's attention last year, according to the agency.

Discovery Communications owns several programming, retail and educational assets including the Discovery Channel, TLC and Animal Planet. In August 2005, around the time of Liberty's spin-off of Discovery, Malone bought 400,000 shares of the company. That purchase brought his holdings in Discovery to 1.98 million shares, a 28 percent stake that at the time was valued around $185.8 million.

Under antitrust laws, Malone's holdings exceeded a threshold of $53.1 million, triggering a requirement that he report those stock purchases to regulators. In its complaint, the FTC said Malone told the agency that he and his lawyers were not aware of new interpretations of the reporting requirement and that they had relied on outdated guidelines from 2001 that did not include that threshold amount.

Liberty declined to comment.

The FTC said Malone violated another filing rule in 2008. After filing a corrected report on his earlier purchases, Malone was required to wait 30 days before buying additional shares. He violated that rule two days later by exercising options to buy an additional 66,667 shares of Discovery.

"Although Mr. Malone may have inadvertently failed to file at the appropriate time for his 2005 purchases of Discovery shares, once he made a corrective filing in June 2008, he was required to observe the waiting period before acquiring any more shares," said Marian Bruno, deputy director of the FTC's Bureau of Competition.

Malone expanded his media holdings in February when Liberty Media gained stock and seats on the board of the troubled Sirius XM Radio in exchange for $350 million in high-interest loans.