Unlocking iPhone 4 (turn into ipod?)?

My friend found an iPhone 4.
password locked on it also. There's pretty much no legit way to turn it in, so i wanted to perhaps turn it into an ipod touch.
Is there any tutorials on any hard resets or anything out there? Most I looked up required going into settings. But I can't do that since this phone has a password on it.
and tuts?

If you didn't care for the data on the phone, you could put it in recovery/ dfsu (I think it's also called that).To do this, you have to shut off the phone by holding the lock button and sliding the power off slider. Once it is off, hold down the lock button and home button for ten seconds. Release the lock button, but remain holding the home button. Next connect the phone to your computer and open Itunes. Itunes will tell you that the phone is in recover mode and must be restored before using. Clicking ok will begin downloading the newest IOS and restoring the phone to factory settings.

Here is a tutorial if you still need help with the recovery mode:

Hope I helped.