Clear esn means that the phone may be activated on the network it is made for. Bad esn (in my uninformed opinion) means that the phone may not be easily activated on the network. I bought a bad esn phone, called verizon about it, and they said it was stolen.
On a legal level, if he is informed that he is in possession of stolen property, he must report it to the authorities. If they can't find the rightful owner after a certain amount of time, he would then be allowed to own it.
But that's just on a legal level. No idea how Verizon actually handles these matters
Bad esn can be a lot of things. Lost stolen or a locked phone. If the esn has gone bad it is a parts only phone. If placed on the stolen list only the original owner who placed it on the stolen list can remove it from that list.
If it is lost as reported to insurance if takes an act of god to get it removed from that.
Basically dont buy a bad esn phone unless you need it for parts, or as a charging station. Even if they say it is a clear esn I would ask them for it and call verizon to double check.
I was never able to activate the phone. I actually bought it on eBay and returned it to the guy I bought it from.
I would also be very wary of "clear esn" folks too. Some people get a free phone from a verizon, t-mobile, att, etc. promotion and try to turn around and sell that phone. Most carriers require a phone to be activated and used for a certain time before it can be used on another line if it was part of a promotion. If you purchase one of these phones, the network may not be interested in activating it.
If you buy a phone with a bad ESN number, you can use some programs(like "DFS Tool" - cdmatool.com) and edit it. How to do this see video on youtube . This will helps you to solve many problems because it is professional tool. Good luck