Sherry Chen filed a discrimination complaint against the Commerce Department after being fired.

PHOTO: SAUL LOEB/AGENCE FRANCE-PRESSE/GETTY IMAGES

A Chinese-American hydrologist at the heart of a discontinued spy case has filed a discrimination complaint against the Commerce Department after it fired her for many of the same allegations a U.S. attorney decided to drop.

The Justice Department alleged in a January 2015 indictment that Sherry Chen had misused a federal dams database and lied about her communications with a Chinese official. But it decided to drop the case two months later, court records show.

Nevertheless, Ms. Chen wasn’t allowed to return to her job at the National Weather Service’s Ohio River Forecast Center where she worked to predict floods, according to her May 2 complaint, which was reviewed by The Wall Street Journal. After an appeals process, the Commerce Department fired her in March over many of the same issues raised in the case that had been dropped a year earlier, according to a termination letter also reviewed by the Journal.

Ms. Chen’s employment dispute comes amid concerns from Chinese-American leaders and others that the U.S. government is racially profiling their community as it aggressively pursues Chinese spies and hackers. Since December 2014, the Justice Department has dropped three high-profile Chinese espionage-related cases: Ms. Chen’s, one against a Temple University professor, and another against two former Eli Lilly scientists.

In a November 2015 letter signed by 42 members of Congress, Reps. Ted Lieu (D., Calif.), Judy Chu (D., Calif.) and Keith Ellison (D.,

Minn.) asked Attorney General Loretta Lynch to open an investigation into whether race or national origin played a part in such cases. "Otherwise innocent actions by Americans do not become suspicious simply because the person taking those actions has an ethnic surname," said the letter.

"If you took out the China connection, neither of those cases would have ever been brought in a million years,” said Peter Zeidenberg, a Washington, D.C.-based lawyer at Arent Fox LLP who represented both Ms. Chen and the Temple University professor. "Everything that has a China connection is scrutinized in a different way."

A Justice Department official said Friday of the three recent cases that it decided to drop: “We found no indication during our inquiries with the U.S. attorneys’ offices that impermissible considerations played any role in the handling of these cases and have concluded that the race, ethnicity or national origin of the individuals charged was not a factor.”

Carter Stewart, the former U.S. attorney who decided to drop Ms. Chen’s case, said in a recent interview that when people have dealings with foreign government officials, as Ms. Chen did, it will raise flags, but that ultimately he didn’t believe her conduct merited prosecution. Mr. Stewart, who left the Justice Department in March to join a foundation, added: “When people are investigated and ultimately not prosecuted it can still take a toll on their and their families’ lives, and that’s an unfortunate reality of our criminal justice system.”

Ms. Chen’s troubles began in May 2012 when she contacted another government colleague asking for public information about dams, in an attempt to answer a question from a water-resources official in China, according to the complaint filed by her Cincinnati-based employment lawyer Steve Simon of Tobias, Torchia & Simon.

Ms. Chen had met with the official, who was a former classmate, on a recent family trip to China, and he had asked how U.S. federal and local governments share costs in funding dams, the document said.

Ultimately Ms. Chen, who became a naturalized U.S. citizen after immigrating to the country in 1992, sent the Chinese official some public information and told him he should contact her colleague directly if he had further questions, the complaint said. Unbeknownst to Ms. Chen, that same colleague had incorrectly flagged her to Commerce Department officials as a “Chinese national” and said she posed a security threat, the complaint said.

That prompted a multiyear investigation by law-enforcement agencies and the indictment that prosecutors ultimately dropped, according to the document. Still, officials at the Commerce Department, the Weather Service’s parent agency, concluded Ms. Chen’s conduct warranted dismissal. Administrative actions often have a lower threshold than criminal charges, and the officials said they were concerned that she had taken action in response to a request from a Chinese official.

“That you are of Chinese descent is irrelevant. That you reached out to [a colleague] at the behest of an official in the Chinese government is not irrelevant,” the department wrote in its letter dismissing Ms. Chen. “That is a vital distinction, and it is what prompted the investigation that exposed your misconduct and led to your proposed removal.”

A Department representative said the agency was barred from commenting on matters involving Ms. Chen unless she provided a waiver allowing it to respond, which she declined to do.

But to Ms. Chen, this was a clear case of discrimination, and she said her dismissal terminates important work she was doing on behalf of the American public. “The victim isn’t only me—it’s also our agency,” she said in an interview. “I have a lot of work unfinished. My [forecasting] model really saves peoples’ lives.”

Her lawyer, Mr. Simon, added, “When the criminal charges were dropped, they owed her an apology. Instead they gave her a termination notice.”

The Commerce Department, in its letter terminating Ms. Chen, also accused her of improperly accessing the National Inventory of Dams database using another colleague’s password, in an attempt to help the Chinese official. The department said she didn’t ultimately send the official any information from the database, according to its termination notice.

Ms. Chen has said she immediately recognized she couldn’t share information from that database once she saw it was restricted to government users. She also said the database wasn’t sensitive and that information in it was generally available to the public on other websites.

In her discrimination complaint, Ms. Chen emphasized that the Commerce Department took no action against the U.S.-born co-worker who had provided what he believed to be a communal password to Ms. Chen.

Ms. Chen is seeking to be reinstated and to receive back pay and other damages, the complaint says. (Source:The Wall Street Journal)