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12/14/10 2:45 AM EST

Yanks miss out on Lee as lefty heads to Philly

NEW YORK -- The Yankees, with all their clout and all their resources, almost always get their man. But this time, they didn't.

As Monday night turned into Tuesday morning in the Bronx, all the mighty franchise could do was stare at a glaring hole in its starting rotation, while the Red Sox have done nothing but make head-turning moves this offseason.

All this happened because Cliff Lee did on Monday night what most free agents in his situation rarely do. He took far less money to join a Phillies team he fell in love with a year ago, thus giving Philadelphia a star-studded rotation and putting the Rangers and Yankees in an instant bind.

All along, Texas -- an organization Lee enjoyed in the second half of 2010 and one that offered close proximity to his Little Rock, Ark., home -- and New York -- which offered him the big stage so many players of his caliber struggle to turn down -- were seen as the clear front-runners to land the ace left-hander, while a third "mystery team" quietly lurked in the shadows until decision time neared.

But Monday night wound up providing the most shocking moment in what was an already thrilling offseason, proving that anything really can happen in this crazy free-agent market.

The Phillies, who traded Lee to the Mariners last offseason because they didn't like their chances of signing him to an extension, suddenly surfaced as that under-the-radar team late in the afternoon. By midnight ET, the two sides had agreed on the framework of a five-year deal, with a sixth-year vesting option that could push the contract to $120 million.

One of Lee's first calls was to Rangers general manager Jon Daniels.

"He was very classy," Daniels said late Monday night. "He was very appreciative of the time he was here and how he was treated. He and his family enjoyed his time here. He also enjoyed his time in Philadelphia and liked some of the things that opportunity had to offer.

"People rag on players for following that last dollar. Cliff didn't do that. I have a lot of respect for him."

Besides re-signing fellow icons Derek Jeter and Mariano Rivera, obtaining Lee was the Yankees' No. 1 priority from the start of this offseason, a desire that only intensified after the Red Sox acquired two prominent left-handed bats -- slugging first baseman Adrian Gonzalez in a trade and speedy left fielder Carl Crawford with a seven-year, $142 million contract.

Because of that, New York offered Lee a six-year, $138 million contract with a vesting option that increased the value to $154 million, according to ESPN.com.

But, somehow, the money and the years didn't matter. And now the Yankees must move on.

With Lee out of the picture, New York won't take on the potential dangers that come with giving a 32-year-old pitcher a lucrative seven-year deal. But the organization currently has questions in its rotation behind former Cy Young Award winner CC Sabathia -- a good friend of Lee's who tried to sell him on the Bronx -- and young 18-game winner Phil Hughes. The shaky A.J. Burnett would figure to be the No. 3 man, followed by the unheralded Ivan Nova and Sergio Mitre, if the season began today.

The good news is it doesn't.

The bad news is other options don't seem readily available just yet.

One might be Andy Pettitte, the 38-year-old who has yet to announce whether or not he will retire after 16 seasons in the big leagues and an injury-troubled 2010 campaign. Monday's turn of events surely upped his leverage, though.

The Yankees could also turn toward investing more money into their bullpen, perhaps by re-signing setup man Kerry Wood and adding lefty relief help.

The top two available starters may be a long shot to land in the Bronx, however.

Zack Greinke, whose name has been all over trade rumors, is deemed a tough fit for New York because of previous bouts with social anxiety disorder and because some feel the Yankees may not have the prospects to get a deal done with Royals general manager Dayton Moore. It also seems highly unlikely that the second-best available free-agent starter, Carl Pavano, would find his way back in New York.

But other names are sure to come up. And as Monday night proved, you never know what will happen.

In an interview with ESPNNewYork.com on Monday afternoon -- before the Lee sweepstakes took an unexpected turn -- Cashman expressed faith in what he currently has.

"I really don't think we've got a lot of holes," he told the website. "We've got one of the best in the league in CC. We've got a kid who won 18 games for us last year in Phil Hughes. And I really believe that A.J. Burnett is going to bounce back for us next year."

The Yankees had essentially been after Lee since July, when they tried to acquire him via trade from the Mariners but watched him go to the Rangers instead. Later that season, Lee beat New York with a dominant performance in Game 3 of the American League Championship Series to lead Texas to its first World Series berth.

The Yankees immediately went to work on trying to sign Lee during the offseason.

Cashman met with Lee's camp in Arkansas as early as Nov. 10 to spark discussions. Then on Dec. 8, the Yankees made a six-year, $140 million offer to Lee, only to increase it with the option and more money 24 hours later, after the Red Sox signed Crawford.

All along, New York was said to be in direct competition with Texas while other potential suitors played second fiddle. The Rangers last met with Lee and his agent, Darek Braunecker, on Thursday and presented the ace with a "menu" of different proposals. Texas' last offer was for $138 million over six years, with an option for a seventh season.

It wasn't until Monday afternoon that the Phillies' interest started appearing prominently in reports. Lee was said to have loved his time in Philadelphia during the World Series run in 2009, and he was shocked the organization dealt him that offseason -- leading the way for acquiring Roy Halladay and signing him to a three-year, $60 million extension.

But apparently that love for Philadelphia never died, and it allowed the Phillies to swoop in despite larger offers by their two main competitors.

In Philadelphia, Lee joins an already loaded rotation that includes Halladay, Roy Oswalt and Cole Hamels, immediately sparking the argument where it ranks among the best starting staffs in history.

The Yankees, meanwhile, have more work to be done to fill out their rotation.

Alden Gonzalez is a reporter for MLB.com. T.R. Sullivan and Todd Zolecki contributed to this report. This story was not subject to the approval of Major League Baseball or its clubs.