David Milch, the storied mind also behind 'Deadwood,' changed television. Now, according to a lawsuit, the racetrack regular has lost his homes, owes the IRS $17 million and is on a $40-a-week allowance. Still, his supporters stay close: "He's brilliant.”

This story first appeared in the Feb. 26 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

The Santa Anita racetrack sits in silence at the foot of the San Gabriel Mountains, bathed in sunlight, steaming in the heat.

As I pull into its parking lot, I'm struck by the uncommon calm. A few hundred cars are parked in perfect alignment, but space after space is empty. Perhaps that's because it's Super Bowl Sunday, and only hard-core horse-racing fans (or football haters) have peeled themselves off their couches to venture 30 minutes northeast of Los Angeles.

I pay the $1 entrance fee and place my $2 bet, and 10 minutes later I'm standing by the finish line, transfixed, as six horses thunder around the track. For a moment, it looks as if my pick, a mottled gray beauty named Rocket Heat, will break from the pack. Then he falls back. Seconds later, the race is over. Rocket Heat has come in fourth.

"How much did you lose?" a heavyset peroxide blonde asks the man standing next to me.

"Seven bucks," he answers, with a shrug.

"Well, it's either you or me," she says.

Multiply that man's losses by 17 billion, and you'll have something like the annual damage suffered by U.S. gamblers each year, a total of $119 billion in 2013, or about the same as Americans spent on fast food, according to research group H2 Gambling Capital.

Most gamblers limit themselves to modest amounts, and the average American wagers only a few hundred dollars a year. But a small percentage risk everything. Their habit has cost them pain, suffering, embarrassment and debt. They've lost houses, property, friendships, dignity, self-respect, the faith of others and perhaps their faith in themselves. They are addicts.

David Milch is one of them.

Milch, 70, is a four-time Emmy-winning writer-producer who co-created the classic series NYPD Blue and HBO's acclaimed Deadwood. A former English literature professor at Yale, he is known for his cerebral and unorthodox approach to writing, for the profanity of his dialogue and the precision of his plots, for elevating the very possibilities of the once-maligned medium in which he works.

For the past few years, he has been based in an exclusive deal at HBO and is in negotiations to renew it. He is working on an adaptation of Peter Matthiessen's novel Shadow Country, with Jeff Bridges attached to star as 19th century outlaw Edgar "Bloody" Watson. He also is devel­oping a two-hour TV movie version of Deadwood. He has admirers and fans across the spectrum of the television world, though he has not had a successful show since Deadwood ended in 2006.

"We have always felt very lucky to have had David in our family," says HBO chairman and CEO Richard Plepler. "It is obvious to everyone that he is a preternatural talent. What might be less obvious, because he doesn't ever talk about it, is how much time and energy he spends mentoring young writers. I think it speaks volumes about him and reflects his decency and generosity, which is one of the reasons all of us at HBO love him. Over many years, I've watched him treat everyone throughout the company with enormous respect, no matter what their title. He takes time to show his appreciation to everyone. It's why he has so many fans all throughout HBO."

Judging from the accounts of several men and women who know him well, he is a person of extreme talent but also extreme behavior. Now a lawsuit, which was filed last year and is proceeding in Los Angeles Superior Court in Santa Monica, indicates that he lost $25 million from gambling between 2000 and 2011 alone. Colleagues estimate he has earned more than $100 million across his three-decade Hollywood career, but the lawsuit reveals he is left with $17 million in debts.

That marks a breathtaking financial fall for one of the most admired creative figures ever to grace the world of television. "He's in debt to the IRS," says one friend. "He's doing what he can, but it's hard for him and everyone close to him."

A publicly available legal complaint obtained by The Hollywood Reporter and filed last year by attorneys for Milch's wife, Rita S. Milch, details the couple's finances and seeks damages from their business managers, Nigro Karlin Segal Feldstein & Bolno LLP (NKSFB), for not informing her of the full extent of her husband's losses.

These legal documents do not indicate how much Milch has made from his TV work, but a New Yorker profile of him that ran in 2005 said he earned $12 million in his last three years on Hill Street Blues, on which he was co-executive producer, and noted he had made more than $60 million from NYPD Blue, the ABC hit drama that ran for 12 seasons from 1993 to 2005. That article appeared before he was due to receive many millions of dollars more from NYPD's syndication sales. He used some of his money to buy houses in the tony Brentwood section of Los Angeles and on Martha's Vineyard, together worth more than $13 million.

But nearly everything he made is now gone.

Since Milch and his wife agreed to a payment plan with the IRS, according to the complaint, they have sold one of their two homes and put the other on the market. Real estate records indicate that the Milches sold their Brentwood house (on Moreno Avenue) for $4.8 million in May 2014, having lived there for a quarter of a century. According to Zillow, the house has six bedrooms, five bathrooms and more than "7,500 square feet of living space."

Their 22-acre Martha's Vineyard estate is listed for $8.95 million, but has not yet found a buyer. That home, built in 1880 with eight bedrooms and 11 bathrooms, was purchased for $4 million in 1996 but has liens against it. It features a guesthouse, a writer's studio and a beach cottage as well as the main building.

At the time it was first listed, Janet Federowicz, a realtor representing the property, told Variety (in that publication's words): "With their children grown they [the Milches] don't use the compound as much as in the past and it's time to pass the compound to another family."

At one point, documents obtained by THR reveal that Milch took out a loan for $3 million from Laughlin Phillips. THR could not confirm that this is the same Phillips who was a onetime CIA agent, then museum director and founder of Washingtonian magazine, or if the loan ever was repaid.

More recently, Rita has been forced to sell "a significant amount" of her jewelry and art, according to the lawsuit, and also has held several garage sales to raise cash.

Friends of the couple, who speak of them with great warmth, say Milch's gambling has come under control at various times, but then he has lapsed. "On Deadwood, he swore off gambling and sold all his horses," says a former colleague. "It was understood he wasn't gambling. On NYPD Blue, he had a period of being very outwardly sober."

From left: Milch was joined by his wife, Rita, and his daughters when he was honored with a star on the Hollywood Walk of Fame in 2006.

The complaint details how Milch is now being given only a tiny allowance by his wife. "Rita makes sure that David is unable to gamble, providing him with only $40 per week in cash," notes the suit. Milch, who authorized representatives to speak on his behalf but was not interviewed for this article, is not a party in the suit, which was filed by his wife, an artist and former documentary filmmaker.

The writer-producer always was considered brilliant but also eccentric: His writing style consists of dictating his thoughts, sometimes while lying prone on the ground, often surrounded by other writers.

"He's obviously a genius and extraordinarily talented, and he's got a fire that burns in him brighter than anyone else," says horse trainer Darrell Vienna, who helped Milch connect with real-life cowboys and horse wranglers while doing research for Deadwood. "But it can cause a lot of damage. He's an extraordinary person. He's insightful in everything he does — people, horses, everything — and he's very insightful about himself, and therein lies the rub. He's a person of extremes."

A self-confessed former drug user in the '80s ("I was a bitter heroin addict at the time," he told an MIT communications forum in 2006) as well as a gambler, Milch is well-known at racetracks, where he once owned several horses. Racing and gambling were the themes of his HBO series Luck, canceled in 2012 after three horses died during filming.

"He was one of the most devoted gamblers," says John Perrotta, an author and adviser on that show. "He was very serious about it, and he was a very good handicapper."

Handicapping is the process by which odds are analyzed in a way that improves the chances of winning. You can, for instance, make what's called an "exotic bet," in which you guess which two or three or four horses will be the first to cross the finish line and in what order. The formation of these exotic bets was the subject of the first scenes of Luck, which Milch once described as his "love letter" to horse racing. Perrotta says they came directly from his experiences with the writer.

One acquaintance familiar with Milch's gambling habits describes a man who couldn't stop betting once he got started: "He was crazy. He'd bet thousands and thousands of dollars. He'd bet every race." Multiple people note that he was a regular at Santa Anita as well as at Hollywood Park, which ceased operation as a racetrack in 2013.

At the 1998 Emmy Awards, Milch (far right) celebrated a win for outstanding writing for a drama series with Bill Clark (left) and Ted Mann, his collaborators on 'NYPD Blue.'

Tom Quigley, the VIP player concierge at Santa Anita, often saw Milch at the track, where high rollers who wager more than $5,000 a day have their own suite with white leather couches and a private bar. "[His] personality is [that of] a mad genius, and his approach to gambling is the same," says Quigley. "What makes Kobe Bryant a great basketball player is the same thing that makes Milch a creative wizard at the racetrack. He would think outside the box. There are so many intangibles, and you can see it in all the aspects of his life."

Perrotta saw that brilliance, too. "David was really good at handicapping — he was very, very good at picking winners," he says. "With such a complex mind, he could do these exotic bets. But it's what holds every gambler back: In the end, you do it too much."

Hollywood has a long history of loving gamblers, whose story often has been romanticized, and whose skill — or lack of it — has been the subject of movies from 1965's The Cincinnati Kid to 2003's The Cooler. Famous gamblers have included such towering figures as Louis B. Mayer and Darryl F. Zanuck.

The industry's passion for gambling has taken many forms, from blackjack to poker to sports to roulette to the horses. During the 1970s and '80s, A-listers from Walter Matthau to Johnny Carson to David Begelman met regularly to play poker, and those games helped oil the wheels of Hollywood's business machine, not least for Begelman, an agent turned executive whose money problems were at the heart of one of Hollywood's biggest scandals.

After Begelman was found to have embezzled money from Columbia Pictures, essentially forging checks and cashing them himself, it was widely believed this was at least in part to cover his losses from cards. One man whose name he had used on a forged check told this reporter he forgave the executive, because "he always paid his gambling debts." Begelman committed suicide in 1995.

There is, of course, a huge difference between occasional gamblers and addicts. Marc Potenza, a Yale professor of psychiatry and an expert on addiction, notes that some 70 percent or more of Americans gamble at least once a year, but "only 1 to 2 percent have a gambling disorder."

In Hollywood, a place where every movie or TV show is a high-stakes bet, gambling often seems a natural complement to work. If cards have taken over from horse racing as the industry's hobby of choice, both remain popular at the top echelons of the business.

Warner Bros. chairman Kevin Tsujihara co-owns a racehorse with MGM chairman and CEO Gary Barber and Barber's former partner, producer Roger Birnbaum. Their horse, Comma to the Top, won 14 of its 33 starts with a total purse of $1.35 million before retiring in 2013. Staff at Santa Anita tells THR that Oscar-winning screenwriter Eric Roth (Forrest Gump) is a "constant presence" at the track and that Mel Brooks is a "regular."

An aerial shot of Milch’s former home in Brentwood, which was sold in 2014 for $4.8 million.

Milch’s 22-acre estate, with eight bedrooms and 11 bathrooms, on Martha’s Vineyard is presently listed for $8.95 million.

Another high-profile gambler, Ben Affleck, was asked not to play blackjack at the Hard Rock casino in Las Vegas, where he reportedly was caught counting cards. In October 2012, when asked by this magazine if he still played poker, Affleck answered: "I have a home game that I play with [writer-producer] Grant Heslov and [actor] Hank Azaria. I make it once every three weeks. It's a strategy game, and it's very, very psychological. It's about weakness and strength and divining whether you think the other person is strong or weak."

In her memoir Molly's Game, being adapted for the screen by Aaron Sorkin, Molly Bloom, a onetime executive assistant and cocktail waitress who became notorious as the "poker princess," describes how she ran a regular high-stakes poker game for the likes of Affleck, Tobey Maguire and Leonardo DiCaprio. She often would see players bring $50,000 piles of cash, the buy-in for many games.

After one such game, held at the Viper Room — the West Hollywood club where River Phoenix died, and where players included Maguire, DiCaprio and director Todd Phillips (The Hangover) — Bloom and two fellow organizers were given $15,000 in tips alone. At one point, she writes, Maguire brought in his own $17,000 card-shuffling machine, known as a Shuffle Master. "Tobey won every week," she notes.

Their bets paled beside those of some really high-stakes gamblers, according to a regular on the gambling circuit. In one game alone, attended by an L.A.-based investor, the pot rose to $100 million. "Everyone was out of the game except the billionaires," says the insider.

Today, there is no single L.A. card game with the same type of profile as Bloom's, although regular games take place in individuals' homes. Her arrest for operating an illegal gambling business — she was sentenced to one year's probation in 2014 — may have had a chilling effect on others attempting to move into that arena. Within the celebrity circuit, writer-director Nick Cassavetes (The Notebook) is known to organize games from time to time. But that does not mean the gambling has stopped.

In the litigation, attorneys for Rita Milch allege that the extent of her husband's losses caught her by surprise, and she is seeking $25 million in damages from the couple's business managers.

The complaint claims that she only discovered how bad things were in March 2011, when she was called into NKSFB's offices "to discuss the title to their [Martha's Vineyard] vacation home with two NKSFB employees who worked on her account. She was told it would be a good idea to transfer the house's title to her [and her husband's] three kids. Despite having no knowledge of financial management or strategy, a transference of title seemed odd to Rita, and she asked why they should take this action. Rita was met with blank stares and silence."

Feeling suspicious, the complaint details, she demanded to know the truth about the family's finances and arranged a second meeting with Mickey Segal, the company's managing partner.

"When Rita returned the next day," the suit continues, "she was led into a conference room with Mickey Segal and the two NKSFB employees from the prior meeting. Mickey presented Rita with a printout detailing all the checks that David had requested from NKSFB and cashed at race tracks for gambling between January 2000 and March 2011. The information represented only a portion of the total amount spent at the race track, since it did not include gambling expenses from any other time period, nor did it include large cash draws that were also used for gambling. The amount totaled $23,510,982.04."

Segal then informed Rita that "she and David were approximately $17 million in debt — $5 million in unpaid taxes and penalties, $10 million in mortgages (some of which Rita did not know about) and $2 million in fees to NKSFB and others."

Rita says NKSFB had a responsibility to inform her of this and that she always had reached out to them about large outlays. "Rita would commonly contact Defendants to ask if they could afford the specific expense," the suit notes. "Rita was aware that her husband regularly patronized local race tracks and bet heavily on horse races. Because of that, she frequently inquired of Defendants regarding their financial status. Defendants always assured Rita that their finances were fine, and she reasonably relied on their reassurances."

When she confronted Segal, whose company took 5 percent of Milch's pretax income, according to the lawsuit, "[He] provided Rita with a printout documenting checks written by NKSFB to cover gambling expenses, totaling approximately $25,000,000 from 2000 through March of 2011."

Shocked, Rita asked him why he had never told her. "We were afraid we'd be fired," he allegedly replied.

"We do not believe this case has any merit legally or factually," says Patricia Glaser of Glaser Weil, a lawyer for NKSFB, "and we are extremely disappointed that they would attempt to sully our client's reputation, in our view with no basis whatsoever."

On a Wednesday night, a few days after my visit to Santa Anita, two dozen men and women are huddled in a circle in a 1950s bungalow, here for a meeting of Gamblers Anonymous.

It's a desperate scene: Several of these people once were successful, and now all reveal problems of an almost unimaginable awfulness. A majority are living in the same halfway house for addicts, though it's not clear if the home is only for people with a gambling disorder or other addictions, too.

One balding, 50-something man speaks about his deep self-loathing after having "relapsed" 28 days ago; he has been sleeping either in a shelter or in his car, but recently had to sell the vehicle. "I'm scared I'm going to be homeless," he says.

A younger man in thick black glasses (only four women are present) describes his grave addiction to blackjack and cocaine and says that now, only 16 days sober, he descends into a catastrophic depression each night after dinner, entering a state he describes as something close to catatonic, overtaken by lethargy and a lingering desire to kill himself. He's heavily medicated and asks the group for advice on ways to escape his misery. Someone suggests exercise, another meditation.

From left: Milch celebrated at the Los Angeles premiere of 'Luck' on Jan. 12, 2012, with Dustin Hoffman and co-exec producer Michael Mann.

A tall, thin man explains how, over the years, he has blown through hundreds of thousands of dollars, only to wind up broke. Now living in the halfway house, he has an allowance of $40 a week — the same amount Milch is getting from his wife. Holding onto that much money, and for that long, is "a miracle," he says.

Nobody can give precise numbers on how widespread gambling is within Hollywood, or how many people have become gambling addicts, but there are 23 Gamblers Anonymous groups that meet regularly in the Los Angeles area. A staffer for Gamblers Anonymous International says the organization does not keep records of membership.

Santa Anita has an in-house support group for problem gamblers called the Winners Foundation, says Quigley. "A million dollars flies through here just like that," he notes.

All this comes at a time when experts are looking at problem gambling as a medical condition, like many other addictions. The latest edition of the Diagnostic and Statistical Manual of Mental Disorders(DSM-5), the official guideline of the American Psychiatric Association, in 2013 for the first time linked pathological gambling and substance-use disorders within the same category.

The DSM no longer uses the term "pathological gambling" but rather refers to those with "a gambling disorder." By lowering the threshold needed to qualify for that disorder, the DSM also may have increased the number of people deemed to have a serious problem. Those who do have the disorder must meet four out of nine traits, which include gambling when feeling distressed ("helpless, guilty, anxious, depressed") and lying to conceal the extent of the gambling.

Asked in 2010 how often he went to the races, Milch told the Daily Racing Form: "It depends on who I'm lying to. I have several different masks that I wear."

Milch was teaching at Yale when he met Rita Stern, an undergraduate 10 years his junior. David had graduated summa cum laude and then attended the University of Iowa writing program, after which he went to Yale Law School. He was expelled from there for reasons that remain something of a mystery but that involved gunshots, LSD and a police car, according to The New Yorker and other publications.

He had planned to become a novelist, but was sidelined by "compulsive, ritualistic behaviors," he said in that 2005 profile.

"I was a drunk all through college," he noted in the February 1998 issue of Written By. That included his time at Yale and in Iowa. "[Once] I didn't get back to my apartment for six months. [A] lot of people are what are called 'high functioning addicts.' I was one of those."

The son of a gastrointestinal surgeon who had his own share of disorders and who later killed himself, Milch grew up in Buffalo, N.Y., and every August would go to the races in Saratoga with his dad, who would give him money to bet, but then "would rebuke me for being a degenerate gambler." Milch also claimed in multiple interviews that he was molested as a teen by a local man.

He married Rita in 1982, the year that Steven Bochco hired him to work on Hill Street Blues, which ran from 1981 to 1987. Before getting married, Rita insisted he go into rehab for his drug and alcohol use, according to The New Yorker.

Milch joined Bochco to executive produce NYPD Blue. More recently, Deadwood ran from 2004 to 2006, and then there was his paean to racing, Luck.

Irish actress Kerry Condon portrayed an aspiring jockey on HBO’s 'Luck.'

"[The track] is a venue of both fascination and dread [whose] fundamental appeals are prehistorical," he told the Daily Racing Form. "It has to do with man's ostensible mastery of his environment and subordination to the outcome. Man likes to think he is the master, but in fact, when they are 40 yards from the finish, you realize it hasn't got much to do with you now."

For several years, Milch owned a number of horses and twice won the coveted Breeders' Cup — once with Gilded Time and then with Val Royal. He bought his first horse with his earnings from Hill Street and sold his last one in 2003.

Milch told The New Yorker that he had sought help in 1999 and had been free of drugs since then, after years of addiction.

His wife's lawsuit alleges that, after she learned about their debts, she insisted he stop gambling and receive treatment, though the suit does not specify what kind. Staff and regulars at Santa Anita — many of whom know Milch well — say they have not seen him for some time.

Rita Milch is now seeking $25 million from NKSFB, whose clients include or have included David Letterman, Madonna, Dr. Dre, Demi Moore and Jonah Hill. (Hill's father, Richard Feldstein, is one of the company's partners.)

The couple declined repeated requests for an interview, made through David Milch's agent, John Burnham of ICM Partners, and Rita Milch's lawyer, Joanna LiCalsi of Cotchett, Pitre & McCarthy.

"We're very confident that we have a good case here," says LiCalsi. "We are prepared to go to trial and are confident that we would be successful if it reaches that point."

Glaser, the defendants' lawyer, has claimed in a court filing that the case should be dismissed on statute-of-limitation grounds; that motion does not address the allegations that her clients failed to meet their fiduciary duty. A hearing has been set for May 11.

Now the Milches must get by on David's HBO earnings, believed to be in the low-seven figures, and residuals, minus their payments to the IRS.

They remain married after 34 years but no longer enjoy a bicoastal life shuttling between Brentwood and Martha's Vineyard or inhabiting the playgrounds of the rich and famous.

Milch (left) was a regular presence on the set of 'Deadwood,' a show he created, wrote and produced, which ran on HBO for three years.

Instead, they are living in an 1,800-square-foot rental in a modest part of Santa Monica.

It's early evening, a few days after my visit to Santa Anita, when I decide to see the house for myself. I drive west on Pico Boulevard, through a morass of cars, alongside hundreds of students pouring out of Santa Monica College and past a vagrant being arrested by the police, his few sad belongings at his side. Then I turn on a side street that climbs away from the city.

I slow as I pass the Milch home. It's a small bungalow, hidden behind a thicket of shrubs, pleasant but undistinguished. The sun is setting, casting an amber hue over the little house and the modest car in its driveway. Streetlights are blinking in the city below.

Many people in L.A. would give their eye-teeth for a property like this, but it's a steep plunge for a man who made more than $100 million and once lived on a gorgeous estate on Moreno.

That's something his friends regret, while still saying how much they love him.

"I am forever changed as a director by David Milch," says one award-winning producer who has worked with him closely. "He's a great teacher and brilliant. He has a wildly expansive mind. He'll talk about Henry James and Shakespeare and dramaturgy in a way you'd never hear on American television. I've never met anyone like him, and there will never be anyone like him again."

Additional reporting by Kim Masters.

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Do You Know a Gambling Addict?

The latest edition of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders (DSM-5), the definitive reference manual for mental health professionals, has redefined the criteria for the condition. No longer grouped with unclassified disorders like kleptomania, gambling disorder has been realigned with substance-related addictions. The questionnaire below outlines the problems that most typically are associated with gambling disorder.

In the past year, has the individual …

1) Felt the need to gamble with increasing amounts of money in order to achieve the desired excitement?

2) Been restless or irritable when attempting to cut down or stop gambling?

3) Made repeated unsuccessful efforts to control, cut back or stop gambling?

4) Often felt preoccupied with gambling — persistently reliving past gambling experiences, planning the next venture or thinking of ways to get money with which to gamble?

5) Often gambled when feeling helpless, guilty, anxious or depressed?

6) After losing money gambling, often returned another day to get even?

7) Lied to conceal the extent of gambling?

8) Jeopardized or lost a significant relationship, job or educational or career opportunity because of gambling?

9) Relied on others for money to relieve desperate financial situations caused by gambling?

10) The APA says that four or more “yes” answers signals the presence of a gambling disorder.

Mild Four to five “yes” answers

Moderate Six or seven

Severe Eight or nine