Yes, it seems that the USB port on the device is broken and hence the HD500 is locked at the current firmware version until this is fixed. Unless the broken USB was made clear in the sale description you may have a case with  the auction site managers or the seller (assuming he/she wants to keep a good reputation on the site). I would  return it if you can and look for another one. 

If you want to keep the device and try to restore the usb connectivity.......

Like scottyo78 says, holding down the left nav key while bootiung will reset the global parameters, including setlist names (not presets) to their factory defaults. After doing this you should also recalibrate the pedal.

http://line6.com/support/docs/DOC-2222

http://line6.com/support/docs/DOC-2223

However, this does not reinstall the factory presets. The only way to do this in the HD500 is to reinstall the firmware, or use HD500 Edit to reload a previously saved bundle of the factory presets.

Here's how to update/reinstall firmware:

http://line6.com/support/docs/DOC-2057

Of course, that will only work if you have a working usb connection - which seems to be your problem. Unfortunatley, since you have already tried unsuccesfully to have it repaired by an electronics repairman, I think you need to either find another local repairman, hopefully with better results, or send it to an authorized Line 6 service centre, absorbing the costs. Sorry about that.