Skycity secretely lobbied the government to change smokefree laws - and allow gamblers to smoke inside its Auckland casino.
As an apparent compromise, the company suggested a legal exemption could be limited only to high-value foreigners - a suggestion rejected by civil servants as a potential breach of the Bill of Rights.
The Problem Gambling Foundation says the "cynical" move has "put paid to their [SkyCity's] claims of being a good corporate citizen".
SkyCity defended the move as giving it a "level playing field" with Australian casinos, some of which have negotiated exemptions from smoke-free laws.
SkyCity's move is buried in documents relating to negotiations to build a convention centre in Auckland.
SkyCity had submitted that "additional internationals would be attracted by the promise of a more enjoyable gambling experience", but the government paper notes that permission would require an amendment to the Smoke Free Environments Act, and adds: "Such an amendment is likely to be controversial, and attempts to narrow it so it only applies to foreign nationals will give rise to issues under the New Zealand Bill of Rights Act."
Problem Gambling chief executive Graeme Ramsey slammed the bid: "They understand the relationship between smoking and gambling and it is an absolutely cynical attempt to keep people gambling as long as possible."
SkyCity spokesman GJ Thompson said it had wanted to get equal footing with Australian casinos and "address the competitive disadvantages" it faced against Lotto and the TAB.
He said SkyCity was a "leading corporate citizen" because it employed more than 3000 people, paid $140 million in taxes, and made community and charitable donations.
The news comes as SkyCity's attitude to smoking is again under the spotlight.
On August 7 it will be the focus of a judicial review at the Auckland High Court.
Problem Gambling, the Salvation Army and the Cancer Society have combined to fund a challenge to the Department of Health's policies on outdoor smoking areas at licensed premises, and will use SkyCity's Diamond Lounge as their case study.
The ministry uses an airflow calculator to decide if an area is outdoors, and therefore smoking can be permitted.
The Diamond Lounge - which is enclosed and roofed, but ventilated by louvre windows - complies with the calculator, but the three groups will argue it is effectively indoors.
"My philosophy on this is . . . if you can hang a picture on a wall, it's indoors," said the Cancer Society's national tobacco control adviser, Skye Kimura-Paul.
Ramsey said SkyCity was exploiting a legal loophole. But Thompson, for SkyCity, said it had bettered ministry guidelines, which had been adopted by many businesses.
The Diamond Lounge is central to the case for several reasons. Problem Gambling hopes a ruling would dent SkyCity's plans to install several similar spaces in the casino, a bid which is presently before the Gambling Commission.
They also want to break the link between punting and smoking.
"The one thing that can give a gambler time to think about what they are doing is the need for a cigarette and often that is the only thing that can drag a problem gambler away from a machine and give them time to reflect," Ramsey added.
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