Jeff Nolan, via Cotton Green, reports about an apparent conflict of interest at Silicon Valley (Palo Alto) venture firm, Technology Crossover Ventures.

Technology Crossover Ventures recently made news by being part of the syndicate that funded an anti-spyware company, Webroot ($108m in a first round of investment), but the firm also invested in an adware company, Claria, formerly known as Gator.

…So on one hand they invest in a company that contributes to a problem solved by another. I sense that the TCV folks are a little sensitive to this perception as well, they recently removed Claria from their portfolio company listing on their website, although thanks to a cached page on Google, one of Claria’s press releases can still be found on TCV’s website.

We checked in with TCV to get the full story. Turns out, according to partner John Drew, that TCV’s investment in Gator was made in March 2000, back at a time when Gator was merely an e-wallet company, before it began pushing its adware product (indeed, we used it for a while, but stopped in 2002). TCV never took a board seat on the company, and didn’t participate in any of the company’s deliberations as it moved toward adware, and hasn’t had any involvement with the company for some time, Drew said. “They morphed their business model into a different kind of business model,” said Drew. Even the TCV partner who made the Gator investment hasn�t been with the firm for three years, he said. “We�ve got Gator stock, and if you want to buy it, I�ll sell it to you,” Drew told us. “It�s illiquid,” he said of TCV’s ownership stake in Gator. Gator is still a private company, and so TCV can’t get rid of it easily.

As for Webroot, Drew said TCV is “very active” with its direction. He and partner Jake Reynolds are both on the board. “Is there a conflict? Certainly not in anything we do, day in and day out. Is there a concern that there is an appearance of conflict? Yes.” Apparently, Webroot’s management was so concerned about it that it didn�t want TCV to lead its venture round. Drew and Reynolds then offered to take the Gator reference off their Web site.

It is true, there’s more behind the complex VC relationships in Silicon Valley than what first meets the eye. But a lot of times, it’s not all that sinister.

UPDATE: Kind of interesting to see how the public relations world grapples with developments on the b’sphere. See Nolan’s response to TCV response.