Charles,

Apparently, VFP searches its own path as well when the directory passed to the FILE() is the root of a drive. This occurs even if the drive does not exist. If the directory is not the root of the drive, it does not. A simple workaround for this problem would be

lcpath = SET('PATH')
SET PATH TO
? FILE(lcfile)
SET PATH TO (lcpath)

This may be something that needs to be reported as either a doc error or a bug. I can't find anything on it in the MS KB.