ARTCC CTLR AT ZTL LOST SEPARATION BECAUSE OF FAULTY MODE C INFO.

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A C150 DEPARTED HKY DIRECT BZM. THEY FORGOT TO TURN THEIR XPONDER ON. I TOLD THEM RADAR CONTACT; TURN ON YOUR XPONDER. WHEN I GOT BACK TO THEM A COUPLE OF MINS LATER; I SAW A VFR CODE. IT DAWNED ON ME THAT THIS WAS PROBABLY A STUDENT. I SLOWED DOWN A LITTLE AND ASKED THEM TO SQUAWK XXXX WHEN THEY GOT A CHANCE. I FINALLY GOT A GOOD BEACON WHEN THEY WERE OVER TAWBA; ABOUT 5 MI FROM THE ARPT. ACFT X WAS ONLY AT 3000 FT AND CLBING VERY SLOWLY TOWARD BEM. I HAD A BE58 LNDG HKY THAT I WAS VECTORING PARALLEL TO ACFT X; WAITING FOR ALT SEPARATION SO I COULD TURN THE BARON ONTO THE ILS/FAC. I ASKED ACFT X IF HE COULD INCREASE HIS CLB RATE. HE COULDN'T. I INFORMED THE BARON OF THE TFC AND ADVISED THAT I WOULD TURN HIM TOWARD THE LOC/FAC WHEN ACFT X WAS OUT OF 4400 FT. THE BARON WAS AT 3400 FT. I WAS VERY BUSY. MULTIPLE APCHS AND DEPS TO MULTIPLE ARPTS. FINALLY! I SAW ACFT X LEAVE 4400 FT AND TURNED THE BARON TOWARD THE LOC/FAC. ABOUT 1 MIN LATER; ACFT X ADVISED ME THEY HAD SOME TROUBLE WITH THEIR MODE C EARLIER. THEY WERE OUT OF 4100 FT; WHAT DID THEIR MODE C SAY? IT SAID 4700 FT. ACFT X AND THE BARON WERE ONLY 2 MI APART. THERE WAS NOTHING TO BE DONE. I WAS ALREADY TURNING THE BARON INBOUND; WHICH TURNED HIM AWAY FROM ACFT X. I RELIGIOUSLY VERIFY MODE C ON DEPS; BUT BECAUSE OF ALL THE XPONDER TROUBLE AND TFC VOLUME; I MISSED CHKING THIS ONE.