BB Torch :: Stolen Torch Now Recovered But Useless

I had my phone stolen in December and it has since been recovered, despite its 3 weeks spent in a wet ditch the phone still turns on and appears to work. My problem is that I contacted my service provider O2 and requested that they unlock the handset so I can use it again. I was told by them that once a Blackberry handset has been reported stolen and blocked then it can never be used again.Can someone verify this as, if this is correct I would of never of blocked the phone in the first place if there was a slim chance of it being returned. So my lovely blackberry torch is currently a very expensive paperweight.