My guess is that the file that you are trying to copy is also a file in the project (same name). The file you have is a report file (FRX) and I guess that your project structure contains this file in a sub-directory "Reports". In the project file, it stores the path relative to the base directory containing the PJX file. So it would store as:

..\Reports\MyFile.FRX

If the 'Reports' directory exists as a sub-directory from your project file. During execution of the built project, VFP will always use the file included in the build regardless of the path that you give. So I am guessing that the copy command is being 'hijacked' by this and the relative path is being set to your variable.