Failed opening 'pm' for inclusion

When I use Drush 6.x-4.0-rc4 I cant run drush upc, all I get is Failed opening 'pm' for inclusion. It may be something weird with my setup, but switching back to Drush 6.x-4.0-rc3 and everything is fine. I've tested multiple times.

Here's what I get:

$ drush upc        
WD php: include_once(pm): failed to open stream: No such file or directory in        [error]
/home/user/bin/drush/includes/command.inc on line 945.
WD php: include_once(): Failed opening 'pm' for inclusion                            [error]
(include_path='.:/usr/lib/php:/usr/local/lib/php') in
/home/user/bin/drush/includes/command.inc on line 945.
It's a security risk to have a backup folder in your Drupal root. You must move it   [error]
elsewhere before proceeding.
include_once(pm): failed to open stream: No such file or directory in                [warning]
/home/user/bin/drush/includes/command.inc on line 945.
include_once(): Failed opening 'pm' for inclusion                                    [warning]
(include_path='.:/usr/lib/php:/usr/local/lib/php') in
/home/user/bin/drush/includes/command.inc on line 945.
An error occurred at function : drush_pm_updatecode_validate                         [error]

This is what I get with drush upc --debug

$ drush upc --debug
Bootstrap to phase 0. [0.03 sec, 1.16 MB]                            [bootstrap]
Drush bootstrap phase : _drush_bootstrap_drush() [0.03 sec, 1.28 MB] [bootstrap]
Bootstrap to phase 6. [0.08 sec, 2.84 MB]                                            [bootstrap]
Drush bootstrap phase : _drush_bootstrap_drupal_root() [0.08 sec, 2.84 MB]           [bootstrap]
Initialized Drupal 6.20 root directory at                                               [notice]
/path/to/drupal [0.1 sec, 3.35 MB]
Drush bootstrap phase : _drush_bootstrap_drupal_site() [0.1 sec, 3.36 MB]            [bootstrap]
Initialized Drupal site default at sites/default [0.1 sec, 3.36 MB]                     [notice]
Drush bootstrap phase : _drush_bootstrap_drupal_configuration() [0.11 sec, 3.36 MB]  [bootstrap]
Drush bootstrap phase : _drush_bootstrap_drupal_database() [0.12 sec, 3.38 MB]       [bootstrap]
Successfully connected to the Drupal database. [0.12 sec, 3.38 MB]                   [bootstrap]
Drush bootstrap phase : _drush_bootstrap_drupal_full() [0.12 sec, 3.61 MB]           [bootstrap]
Drush bootstrap phase : _drush_bootstrap_drupal_login() [0.7 sec, 17.44 MB]          [bootstrap]
Successfully logged into Drupal as Anonymous (uid=0) [0.7 sec, 17.45 MB]             [bootstrap]
Found command: pm-updatecode (commandfile=pm) [0.7 sec, 17.45 MB]                    [bootstrap]
Initializing drush commandfile: user [0.7 sec, 17.45 MB]                             [bootstrap]
Including pm [0.7 sec, 17.45 MB]                                                     [bootstrap]
WD php: include_once(pm): failed to open stream: No such file or directory in        [error]
/home/user/bin/drush/includes/command.inc on line 945. [0.72 sec, 18.7 MB]
WD php: include_once(): Failed opening 'pm' for inclusion                            [error]
(include_path='.:/usr/lib/php:/usr/local/lib/php') in
/home/user/bin/drush/includes/command.inc on line 945. [0.72 sec, 18.7 MB]
It's a security risk to have a backup folder in your Drupal root. You must move it   [error]
elsewhere before proceeding. [0.72 sec, 18.7 MB]
include_once(pm): failed to open stream: No such file or directory in                [warning]
/home/user/bin/drush/includes/command.inc on line 945. [0.72 sec, 18.7 MB]
include_once(): Failed opening 'pm' for inclusion                                    [warning]
(include_path='.:/usr/lib/php:/usr/local/lib/php') in
/home/user/bin/drush/includes/command.inc on line 945. [0.73 sec, 18.7 MB]
An error occurred at function : drush_pm_updatecode_validate [0.73 sec, 18.7 MB]     [error]
Command dispatch complete [0.73 sec, 18.7 MB]                                           [notice]
 Timer  Cum (sec)  Count  Avg (msec) 
 page   0.616      1      615.9      

Peak memory usage was 18.91 MB [0.73 sec, 18.69 MB]                                     [memory]