AIR TAXI PLT CONVINCES HIS CAPT TO DSND BELOW ASSIGNED ALT AFTER HE SET WRONG ALT IN ALERTER WINDOW. CAUSED TFC CONFLICT THAT WAS RESOLVED BY CTLR.

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WE WERE DSNDING WITH MULTIPLE LEVELOFFS INTO THE LOS ANGELES AREA. AT 12000 FT WE WERE GIVEN A DSCNT TO WHAT I RECALL AS 10000 FT AND READ BACK AS THE SAME. ATC CALLED OUT 2 ACFT RESTR BELOW US AT 10 O'CLOCK POS AND 12 O'CLOCK POS AND TOLD US TO CONTACT SOCAL. LOOKING FOR THE TFC; CHANGING THE FREQ; AND NOTICING MY CAPT WAS LEVELING OFF AT 11000 FT; I SAID WE WERE ASSIGNED 10000 FT (WHICH I HAD ALSO PREVIOUSLY SET IN THE ALT ALERTER). HE ASKED ME IF THAT WAS WHAT I READ BACK; I AFFIRMED THIS AND AT APPROX 10500 FT WE SAW AN ACR MD80 PASSING BELOW AND TO OUR R. CHKING IN WITH THE NEXT CTLR AT 10000 FT; HE ASKED US TO CONFIRM OUR ASSIGNED ALT. WE SAID 10000 FT AND HE TOLD US TO EXPEDITE DOWN TO 9000 FT. SHORTLY THEREAFTER WE SAW THE SECOND TARGET ABOUT 1500 FT ABOVE XING L TO R AND ENTERING A CLBING TURN TOWARDS US. AFTER ATC GAVE US FURTHER DSCNT AND A FREQ CHANGE; HE COMMENTED; 'THANKS FOR EXPEDITING THE DSCNT.' WHEN WE RETURNED TO OUR BASE; WE HAD A CALL FROM ATC WHICH INFORMED US WE WERE ASSIGNED 11000 FT ACCORDING TO THE TAPES. WE TOLD THE CTLR WE KNEW SOMETHING WAS WRONG WHEN WE SAW THE MD80 PASS CLOSE BELOW TO OUR R. IN RETROSPECT; I SHOULD HAVE CONFIRMED WITH ATC THAT WE WERE CLRED TO 10000 FT WHEN THE CAPT LEVELED OFF AT 11000 FT. ALSO; AS I HAVE READ IN TRAINING MANUALS ON CRM REGARDING ALT ASSIGNMENTS; IT IS A GOOD IDEA FOR THE PNF TO KEEP HIS FINGER ON THE ALT ALERTER UNTIL THE PF CONFIRMS HE HEARD THE SAME; BUT MOST OF ALL; IF AND WHEN YOU MAKE A MISTAKE; HAVING THOSE EYES OUTSIDE IS WHAT'S GOING TO SAVE YOU AND MANY OTHERS.