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Why Rajat Gupta Did It

Umesh Goswami | The India Today Group | Getty Images

Rajat Gupta is going to jail.

He is, by a long shot, the most important businessman ever to go to jail for insider trading. And many on Wall Street are wondering: why?

Not why is he going to jail. But why did he commit the crime to begin with?

Gupta ran the consulting giant McKinsey. He sat on the the boards of five well-known public companies: American Airlines parent AMR , Genpact , Goldman Sachs , Harman International , and Procter & Gamble . He also sat on the supervisory board of Russia's Sberbank and the board of the Qatar Financial Centre.

(Read more: Gupta Sentenced to 2 Years in Prison, Fined $5 Million)

And then it all came to a crashing end because of telephone conversations with the hedge fund manager Raj Rajaratnam, conversations which, according to a federal jury in Manhattan, amounted to providing insider trading tips.

A few people I talked to on Wall Street after the sentence came down had the same reaction as Judge Jed Rakoff: why had someone as intelligent, hard-working and successful as Gupta risked — and now lost — everything to participate in an illegal scheme from which he saw no material benefit?

"So why did Gupta do it?" Rakoff asked.

When Gupta was first charged, I answered this question with these words:

It was something close to sociopathic narcissism—perhaps a belief that he was somehow above the law, immune to the rules that govern the rest of us. The sort of thing we see in Madoff.

I've now been led to believe, though numerous conversations with people connected with Gupta and some of the other players in the insider-trading case, it was something else. (Read more: Rajat Gupta: Bigger Than Madoff?)

Gupta needed to feel like he was, in the words of one of his former friends, "a real player." He intensely desired to been seen as a great man, someone important, someone in the know. Leaking secret information was a way of demonstrating this.

To mangle a phrase, pride goeth before the insider-trading telephone call.

- by CNBC Senior Editor John Carney

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