CAPT OF A B757 DISCONNECTED THE AUTOPLT AND INCREASED THE RATE OF DSCNT IN RESPONSE TO A TCASII RA CAUSING A POTENTIAL COLLISION WITH THE OTHER ACFT BY DECREASING SEPARATION INSTEAD OF INCREASING IT. THE OTHER ACFT'S MODE C XPONDER WAS NOT RPTING THE SAME ALT AS THE PLT HAD GIVEN TO ATC.

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20 MI E OF TORCH ON EL NIDO ARR 12000 FT. RECEIVED VFR TA 1 O'CLOCK POS AT 11500 FT. SHORTLY THEREAFTER RECEIVED A TA WITH TARGET AT 200 FT ABOVE US; 1 O'CLOCK POS AND CLOSING. ZOA THEN CLRED US TO DSND TO 11000 FT. AS THE DSCNT WAS STARTED THE TA CHANGED TO AN RA WITH A DSND COMMAND. AUTOPLT WAS DISENGAGED AND DSND COMMAND FOLLOWED AT 1300 FPM RATE. PASSING 11700 FT WE FINALLY SPOTTED THE TFC AT 11500 FT AND CLOSING RAPIDLY AT WHICH TIME I INCREASED DSCNT RATE BEYOND COMMANDED RATE TO AVOID THE TFC. TFC PASSED BEHIND US WITH BTWN 1/4 TO 1/2 MI HORIZ SEPARATION. ZOA WAS ADVISED OF THE RA. THEY THEN ADVISED THE TFC TO CHK ALT; MODE C SHOWED 12200 FT. THIS WHOLE CHAIN OF EVENTS TOOK LESS THAN 45 SECONDS. WE WERE IN VISUAL CONDITIONS. IF WE WERE IMC OR DID NOT VISUALLY SPOT THE TFC; I THINK THAT THIS EVENT WOULD HAVE ENDED MUCH LESS FAVORABLY. I SUSPECT THIS EVENT WAS CAUSED BY THE ERRONEOUS MODE C OF THE VFR TFC THAT TOLD OUR TCASII IT WAS 200 FT ABOVE US WHEN IT WAS REALLY 500 FT BELOW US. THIS LED TO A DSND COMMAND WHEN WE NEEDED TO MAINTAIN ALT. THIS EVENT FURTHER REINFORCES THE SEE AND AVOID CONCEPT IN VISUAL CONDITIONS AND THE NEED TO AGGRESSIVELY MAINTAIN SITUATIONAL AWARENESS.