Looks like there is some debugging that can be set. Try adding these options to the VM:
-Djava.security.auth.debug=all
-Djava.security.debug=all
It looks these might cause the full path to be printed for the name of the file that is being looked for.
I assume that the client works fine when run from the command line?
BTW, this discussion highlights one of my pet peeves with most Java developers - complete disregard for end users when writting error messages. Imagine how quickly this problem would have been fixed if the programmer who wrote the com.sun.security.auth.login.ConfigFile class constructor would have bothered to mention the full path name for the auth.conf file!