They claim to be out of luck.
There is no doubt in my mind that if Apple wanted to they could unlock that phone.
All that aside, I have not heard yet what would be the problem with Apple unlocking the phone and providing the data to the FBI. Too bad Timmy Kooke has never had any friends thrown off roofs or the heads cut off with a rusty knife.
No problem at all. Even the next 10 phones would be from dead perps or jailed convicts. But all that evidence will be tainted since Apple is not LE trained. Either perps or terrorist conspirators walk on that tainted evidence or the FBI demands the SW to use themselves. The next step is obvious, since that's what they do all the time now on Android and other such trash (I own an Android phone). This is a great time to draw the line, no compromises.