rails newbie - `gem_original_require': no such file to load -- /home/aa/rb1/config/environment (LoadError)

Hello, I'm trying to get started with Rails but I keep getting the
same error, could someone please enlighten me?

$ mongrel_rails mongrel::start -p 8000 -l mongrel.log -P mongrel.pid -
n 5 -e development -c /home/aa/rb1/
** Ruby version is not up-to-date; loading cgi_multipart_eof_fix
** Starting Mongrel listening at 0.0.0.0:8000
** Starting Rails with development environment...
/usr/lib/ruby/site_ruby/1.8/rubygems/custom_require.rb:31:in
`gem_original_require': no such file to load -- /home/aa/rb1/config/
environment (LoadError)
        from /usr/lib/ruby/site_ruby/1.8/rubygems/custom_require.rb:
31:in `require'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/../lib/
mongrel/rails.rb:147:in `rails'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/
mongrel_rails:113:in `cloaker_'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/../lib/
mongrel/configurator.rb:149:in `call'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/../lib/
mongrel/configurator.rb:149:in `listener'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/
mongrel_rails:99:in `cloaker_'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/../lib/
mongrel/configurator.rb:50:in `call'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/../lib/
mongrel/configurator.rb:50:in `initialize'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/
mongrel_rails:84:in `new'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/
mongrel_rails:84:in `run'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/../lib/
mongrel/command.rb:212:in `run'
        from /usr/lib/ruby/gems/1.8/gems/mongrel-1.1.5/bin/
mongrel_rails:281
        from /usr/bin/mongrel_rails:19:in `load'
        from /usr/bin/mongrel_rails:19

I tried it both on Windows and CentOS and I get the same error.

thanks much!
Cristian

What happens if you get into the "/home/aa/rb1" directory and type
"script/server"?