UPDATE:
Don't mean to trouble those offering advice but... i just HAD to post this update!
So, I took this Apple phone into the Apple store in my hometown of Sacramento, California. There is an Apple store within the Arden Fair Mall and there is always a Sacramento City Police officer within the actual store. This is the resolve, I have BOTH a police officer and a large Apple store with dozens of employees, certainly this matter will be resolved.
I walked into the store and approached the police officer, explained the entire story to him and how I wanted to turn it over to him as I understand it, the phone has somehow been reset to a new status and therefore it may be lost or stolen and I would like to get it back to it's rightful owner if possible, or, at least give the liability to the Police department.
The officer agreed, the phone should be, if it could be, returned to it's owner, if it is lost or stolen. He stated how he has had phones lost and stolen and he wanted his back as well. However, he believed I should give it to the Apple store employees so that they could have the phone and then try and find the owner, or, do whatever they do in these matters.
I took the phone to a sales representative who took it to the store manager. It was then explained to me that Apple's guidelines are so strict with regard to phones and their ownership that they could not help. They did not want the phone, they had no idea what to do with it and recommended that I give it to the police officer...
I went back to the Police officer and explained that Apple did not want the phone, they had no idea what to do with it and that I should give it to you. The officer stated, "I commend you for your honesty, your thoughtfulness and more, we need more people like you, but, I can not take the phone, it would not seem right for me to take what is yours" I explained everything again, how I got the phone and more. He still refused to take the phone and just like the Apple store he said, "You are the rightful owner of that phone now, you should just keep it".
I could not believe it! So, back out into the mall I go. I found a phone repair person, I showed him the phone, I showed him that it had broken glass and how I came upon it and asked him what I should do. Of course he suggested having the glass fixed and asking Apple to turn it on for me!
Now, I don't know about having the glass fixed, but maybe that is the answer. Just ask Apple to turn it on for me. If they can not turn it on, please tell me why. If they say, because it has been reported lost or stolen, then, they should be willing to take it, right? I can give it to them! Unfortunately, by the time I returned to the Apple store they were closing, so, I will have to go back. Or, maybe I can ask my current service provider to turn it on... SOMEONE MUST BE ABLE TO TELL ME, "Hey, this phone has been reported lost or stolen and we want it back"
If the phone is lost or stolen, IT SHOULD BE RETURNED TO IT'S RIGHTFUL OWNER. If not, I should be able to turn it on, but, I don't seem to be able to do so. I guess now that I have an Apple ID, maybe I can try that but, I am going to give ONE MORE TRY THROUGH THE APPLE CORPORATE OFFICE. Maybe I can mail it back to them.
Jeez, it should not be this difficult to try and do the right thing... I had 2 phones stolen in February of last year. They were in my RV with many of my other belongings which were all stolen. Almost 400k worth of belongings gone... I wish someone would just give me my computers back, they could keep everything else and I would be happy...
So, I have followed everyone's suggestions, police, Apple store. I have not just thrown the phone in the dumpster as I am still hoping that if the phone was lost or stolen, it can be returned to it's rightful owner...
Apple corporate will be my next step!