Create process код ошибки 193

The code below fails to start documents. I get error 193 (%1 is not a valid Win32 app). Starting executables work fine.
The files are properly associated, they start the corresponding app when double clicked.
I have searched SO and elsewhere for the error message, createprocess stuff etc. (E.g. Why is CreateProcess failing in Windows Server 2003 64-bit?
I know about quoting the command line.

• This is a Delphi XE2 (Update 4) Win32 app in a Win7 64bit VMWare VM.

• The code also fails on the host machine (Win7 64 bit) and in a Virtual PC VM with 32bit XP.

• The apps that should start in the Win7 VM (Excel 2003 and Crimson Editor) are 32 bit.

• The failure occurs both when starting from the IDE or when running the test app standalone

• It used to be Delphi2007 code, the compiled D2007 app where this code comes from works fine everywhere.

What’s wrong with the code?

procedure StartProcess(WorkDir, Filename: string; Arguments : string = '');
var
  StartupInfo  : TStartupInfo;
  ProcessInfo  : TProcessInformation;
  lCmd         : string;
  lOK          : Boolean;
  LastErrorCode: Integer;
begin
  FillChar( StartupInfo, SizeOf( TStartupInfo ), 0 );
  StartupInfo.cb := SizeOf( TStartupInfo );
  StartupInfo.dwFlags := STARTF_USESHOWWINDOW;
  StartupInfo.wShowWindow := sw_Normal;

  FillChar( ProcessInfo, SizeOf( TProcessInformation ), 0 );

  lCmd := '"' +  WorkDir + FileName + '"';     // Quotes are needed https://stackoverflow.com/questions/265650/paths-and-createprocess
  if Arguments <> '' then lCmd := lCmd + ' ' + Arguments;

  lOk := CreateProcess(nil,
                       PChar(lCmd),
                       nil,
                       nil,
                       FALSE,  // TRUE makes no difference
                       0,      // e.g. CREATE_NEW_CONSOLE or NORMAL_PRIORITY_CLASS makes no difference
                       nil,
                       nil,    // PChar(WorkDir) makes no difference
                       StartupInfo,
                       ProcessInfo);

  if lOk then
  begin
    try
      WaitForSingleObject(ProcessInfo.hProcess, INFINITE);
    finally
      CloseHandle( ProcessInfo.hThread );
      CloseHandle( ProcessInfo.hProcess );
    end;
  end
  else
  begin
    LastErrorCode := GetLastError;
    ShowMessage(IntToStr(LastErrorCode) + ': ' + SysErrorMessage(LastErrorCode));
  end;
end;

procedure TFrmStartProcess.Button1Click(Sender: TObject);
begin
   StartProcess('c:program files (x86)axe3','axe.exe');    // Works
end;

procedure TFrmStartProcess.Button2Click(Sender: TObject);
begin
   StartProcess('d:','klad.xls');                            // Fails
end;

procedure TFrmStartProcess.Button3Click(Sender: TObject);
begin
   StartProcess('d:','smimime.txt');                         // Fails
end;

Having this issue on 2.3.1 and 2.4.0 as well as 2.5.0. This is possibly because of another package?
OS: Windows 10
Yarn: 1.12.3
NodeJs: 10.13.0 LTS

"dependencies": {
    "mobx": "^5.6.0",
    "mobx-react": "^5.3.6",
    "react": "^16.6.3",
    "react-dom": "^16.6.3",
    "react-router-dom": "^4.3.1",
    "source-map-support": "^0.5.9"
  },
  "devDependencies": {
    "@babel/preset-react": "^7.0.0",
    "@types/enzyme": "^3.1.15",
    "@types/enzyme-adapter-react-16": "^1.0.3",
    "@types/jest": "^23.3.9",
    "@types/react": "^16.7.6",
    "@types/react-dom": "^16.0.9",
    "@types/react-router-dom": "^4.3.1",
    "electron": "^3.0.9",
    "electron-builder": "^20.34.0",
    "electron-react-devtools": "^0.5.3",
    "electron-webpack": "^2.5.0",
    "electron-webpack-eslint": "^4.0.0",
    "electron-webpack-ts": "^3.0.0",
    "enzyme": "^3.7.0",
    "enzyme-adapter-react-16": "^1.7.0",
    "eslint": "^5.9.0",
    "eslint-config-prettier": "^3.3.0",
    "eslint-loader": "^2.1.1",
    "eslint-plugin-jest": "^22.0.0",
    "eslint-plugin-prettier": "^3.0.0",
    "eslint-plugin-react": "^7.11.1",
    "eslint-plugin-typescript": "^0.13.0",
    "jest": "^23.6.0",
    "jest-enzyme": "^7.0.1",
    "jest-junit": "^5.2.0",
    "less": "^3.8.1",
    "less-loader": "^4.1.0",
    "prettier": "^1.15.2",
    "react-hot-loader": "^4.3.11",
    "rimraf": "^2.6.2",
    "ts-jest": "^23.10.4",
    "typescript": "^3.1.6",
    "typescript-eslint-parser": "^21.0.0",
    "webpack": "^4.25.1"
  },

Edit: I also tried reverting back to 2.2.1 which also didn’t work. I think there is a third party lib or software conflicting with this.