BE1900 CREW AND EMB120 HAD LESS THAN LEGAL SEPARATION IN ZDC CLASS E AIRSPACE.

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I AM THE CAPT OF FLT XXXX; FLYING FROM DEN TO FMN. FOR THE DSCNT INTO FMN; WE WERE ORIGINALLY GIVEN 16000 FT MSL AND WHEN FLT YYYY CALLED FOR AN IFR CLRNC FROM DRO TO DEN; THE ATC CTLR CHANGED OUR ALT TO 17000 FT AND GAVE FLT YYYY AN IFR CLRNC TO 16000 FT. BOTH OF US WERE GIVEN TA'S FOR EACH OTHER AND NEITHER OF US SAW EACH OTHER VISUALLY. WE LEVELED OFF AT 17000 FT AND SAW FLT YYYY ON TCASII. SHORTLY THEREAFTER; THE CTLR ASKED FLT YYYY IF THEY WERE GOING TO CONTINUE THEIR CLB IN THE HOLD OR IF THEY WANTED A VFR CLB ON COURSE. FLT YYYY SAID THAT THEY COULD ACCEPT THE VFR CLB THROUGH 16000 FT. WHEN WE REACHED THE DRO VOR; WE NOTICED FLT YYYY CLBING ON THE TCASII. THEIR CLB CONTINUED UNTIL THEY WERE 400 FT BELOW US ON TCASII AND APPROX 1 1/2 MI. WE RECEIVED A TCASII 'TFC; TFC' AT WHICH TIME MY FO TURNED L. OUR TCASII THEN SHOWED FLT YYYY DSNDING AND ABOUT 5 SECONDS LATER ATC ASKED THEM TO CONFIRM THEIR ALT AT 16000 FT. THEY SAID THAT THEY WERE AT 16000 FT; ALTHOUGH THEY WERE GETTING 'BUMPS IN THE CLOUDS.' MY UNDERSTANDING IS THAT THEY SHOULD NOT HAVE BEEN IMC BASED ON THEIR CLRNC. ATC SAID NOTHING FURTHER AND WE DID NOT SAY ANYTHING.