Hi yes phone was cleared and Itunes was set up to download apps . But it seems Icloud is something different and ios7/8 now has a find my phone feature that can only be disabled if you have your icloud user id and password. Even if you do a factory reset it does does clear this unless you remember to turn off find my phone first which was not a feature of the old ios so you couldnt even if you wanted to.
On the old ios it looks clear when you do a factory reset but its not and shows up as a problem only when you update to latest ios. Which is a real oversight on Apples behalf and suspect there are not allot of genuine people with a stuffed phone as well as people with stolen phones who are not going to come forward about it.
Ive had a good google and seems there is no known solution just a few software scams. Even Apple say you have to contact the original owner which I have tried but in fairness was well over a year since I purchased it.
Duno.