I would simply give the phone back ASAP. The last thing that you need is a theft charge, let alone conviction, on your record.
The information provided in this answer does not create an attorney-client relationship and is not considered to be legal advice.
It's not theft. That said, give it back to avoid the headache!!
In no way am I offering you legal advice, and in no way has my comment created an attorney-client relationship. You are not to rely upon my note above in any way, but insted need to sit down with counsel and share all relevant facts before receiving fully-informed legal advice. If you want to be completely sure of your rights, you must sit down with an experienced criminal defense attorney to be fully aware of your rights.