Bear in mind that as soon as it is reported stolen by the owner the IMEI number will be blacklisted across all networks so it will not be able to be used as a phone.
He will not be able to hook it up to itunes either as it will be registered to the owner.
Do the right thing and hand it in to the police, contact the mobile network it is connected to (you can get the mobile number from the settings I think) or contact the last number that dialled in or out.
End of the day people do get prosecuted for keeping found phones, it is classed as theft and handling stolen goods.